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Monetary policy and financial markets

  • Monthly Economic Monitor Ukraine No.3 (209)

    22.03.2018
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    *Since 2018, the Monitor is awailable without subscription. Full version is attached.

    Gas market reforms lead to energy independence

    The late February was marked by the victory celebration at the Ukrainian gas market as Ukrainian Naftogaz won the case on gas transit against the Russian Gazprom at the Stockholm Arbitrage Court. The Gazprom has to pay the Naftogaz USD 4.6 bn for violating the “take or pay” clause. Together with almost USD 2 bn that the Naftogaz owes the Gazprom in the gas case, the Naftogaz net win is USD 2.6 bn.

    However, already on March 1, 2018, Russia used the same tactic against Ukraine as it did in 2009, namely refusing to supply gas to Ukraine. The Gazprom broke the decision reached in Stockholm on the obligation of the Naftogaz to purchase gas from Gazprom. The country was faced with the shortage of gas as well as reduced pressure in the pipeline used to transit gas to the EU. This time Russia did not reach the effect it created in 2009 and the shortage of gas was felt by Ukraine only for several days. View full text of the highlight.

     

    Executive summary:

    Politics: Ukraine adopted a draft law on Anti-Corruption Court in the first reading. The Parliament is expected to revise the Draft before the second reading to make it compliant with recommendations of the Venice Commission of the Council of Europe.

    Real sector: Industrial output in January increased by 3.6% yoy due to the growth of manufacturing by 9.7% yoy. Retail sales increased, while the construction remained stable.

    Energy sector: The net amount of payment the Gazprom should make in favour of the Naftogaz according to two ruling of the Stockholm Arbitrage Court is USD 2.6 bn.

    Telecom: On March 6, the National Commission for the State Regulation of Communications and Informatization held an auction for 4G communication.

    Agriculture: The Cabinet of Ministers approved the procedures for the provision of the UAH 6.3 bn of state support tothe agricultural sector in 2018.

    External sector: Current account remained in deficit in January at USD 61 m despite a seasonal reduction in imports.

    Fiscal policy: Central fiscal revenues in the first two months of 2018 declined by 0.5% yoy due to higher VAT refunds.

    Social policy: February and the beginning of March were marked by the debates on the need for the full-scale monetization of housing and utility subsidies.

    Labour market: Growth of average wage in January decelerated to 28.4% yoy due to the high statistical base.

    Monetary policy: Consumer inflation remained high at 14% yoy in February.  

    Exchange rate: Interbank UAH/USD exchange rate appreciated steadily in February due to higher export revenues, capital inflows, and lower depreciation expectations.

    State debt: Non-residents’ holdings of state domestic bonds increased in February.

    Issue:  No.3 (209) March 2018
    Attached file  (368.4 kb)
    Authors:  Ірина Коссе, Олександра Бетлій
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