Archive 2010

  • Approved budget may hinder economic development


    GDP: The Derzhkomstat information proves that economic developments in March were in line with our expectations. The performance of industrial sectors and trade improved. However, the Institute will downgrade its forecast of the real GDP growth from current 4.8% taking into account new economic policy decisions of the Government and most recent statistical information. In particular, our assumptions on the level social standards and gas price will be changed. The rapid increase in minimum wages will result in higher labour costs for enterprises that could hinder the recovery in real investments this and next years.

    Risk assessment: One of the major risks for the economic development in 2010 seems to be the reluctance of the IMF to continue cooperation with Ukraine within the program of stand-by agreement. As after the approval of the State Budget Law for 2010 fiscal policy becomes even looser than before, there are some chances that the IMF in 2010 will not provide Ukraine with the next loan instalment within current agreement or under new program. As a result, loan from the World Bank and successful Eurobonds placement might become rather doubtful. As internal sources for fiscal deficit financing are scarce, the Government will face the necessity to under-finance its liabilities. Besides, the reluctance of the IMF to continue the program might deteriorate further the perception of foreign investors, which would negatively impact financial and capital account and create additional pressure for national currency.

    Issue:  No.4 (32) April 2010
    Reviewer:  Movchan Veronika

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