Highlight: DCFTA implementation - DELAY IN DCFTA IMPLEMENTATION: TACTICAL GAIN OR LOSS?
Politics: Regardless agreement negotiated on September 5 between representatives of Ukraine, Russia, Donbas militants, and the OSCE pro-Russian militants continued attacking Ukrainian troops in a number of places.
Real Sector:Industrial output in August contracted sharply by 21.4% yoy mainly due to themilitary conflict in Donbas.
Energy sector:Ukraine is engaged in three-party gas negotiations with Russia and the EU. However, the final solution on gas price, debts redemption and gas transit is still to be found.
Agriculture:Higher grain harvest is likely to result in exports growth. However, Ukraine has already fully utilized quota granted by the EU for duty-free imports of wheat and wheat flour, as well as corn.
External sector: Balance of payments was balanced in August due to surplus of merchandise trade andpublic sector borrowings.
Fiscal policy: Central fiscal revenues in September dropped by 7.2% yoy. As a result, the Government had to cut discretionary spending. Overall, it will be difficult for the Government to execute the budget fully this year.
Social policy:According to preliminary plans social standards in 2015 will be increased at a lesser extent than officially projected inflation. As a result, purchasing power of many households will reduce further.
Labour market:Average wage in August dropped by 12.7% in real terms due to military conflict in the East, economic downturn, high fiscal pressure and acceleration of inflation.
Monetary policy: In September prices increased for almost all categories of goods and services by 2-5% mom. This was a result of fast transmission of exchange rate volatility that started in August.
Exchange rate: In September exchange rate of hrvynia remained volatile and fluctuated in UAH 12-15 per USD despite NBU sales of foreign currency on auctions, new rounds of administrative restrictions and direct pressure on banks.
State debt:In September Ukraine received the first tranche of sixteen-year loan from the World Bank at USD 500 m in the framework of the first development policy loan.
