Ukraine’s economy will start the new year with two main challenges: pressure on the exchange rate and insufficient fiscal revenues.
After hryvnya weakened to over UAH 8.2 per USD in the first half of November the NBU introduced administrative measures to stem the demand and increase supply on the market. As a result, situation stabilized but we still expect the NBU to increase exchange rate flexibility gradually allowing hryvnia to depreciate by 5-10% in 2013.
In November the Government also faced acute shortage of funds as revenues and borrowing were from time to time insufficient to cover current spending. Overall, for last two months of the year the Government is likely to lack near UAH 25-30 bn for financing planned expenditures, which would result in further increase in borrowings and under-executed expenditures.
