Archive 2016

  • Monthly Economic Monitor Ukraine No.1 (183)


    Highlight: Year 2015

    2015 was a year of many wins and losses for Ukraine. The year started with a big escalation of military conflict in the East of the country, which pushed economy to a larger recession than expected in the beginning of the year. It led to sharp hryvnia depreciation, inflation above 40%, drop in industrial output, and contraction of domestic demand. Fragile macroeconomic stabilisation was reached in the third quarter of 2015, while recovery is likely to be very slow. The Government has finally started implementing long delayed and necessary reforms. Deregulation was among largest successes in government policies last year. Some progress was also made in implementing anti-corruption measures, but they were slow and much remains to be done. Introduction of pilot project in electronic procurement in 2015 and the approval of the law on Public procurement (that becomes effective in 2016) are also among major achievements. The National Bank of Ukraine moved to more flexible exchange rate, though did not cancel administrative measures at the market. The banking sector became more sound as problem banks were liquidated. Fiscal situation improved last year as high inflation resulted in additional revenues from such taxes as VAT and excises. At the same time, the Government failed to approve comprehensive tax reform, but approved only fragmented amendments to the Tax Code. Overall, long list of reforms is still in the agenda.

    Politics:In December, the European Commission (EC) formally recommended the EU council to grant visa-free regime for short-time trips of Ukrainians to the EU. The regime may become effective in mid-2016 if Ukraine fulfils taken obligations.

    Real sector: Real GDP in the third quarter of 2015 grew by 0.5% qoq. This reflected increase in economic activity in agriculture, construction and transport and stable nonfinancial services sector.

    Energy sector:In January-November 2015 Ukraine imported 13 m t of coal worth USD 1.5 bn from Russia, the USA, Australia and other countries.

    Agriculture:The Parliament amended special the VAT regime for agricultural producers since 2016 o reduce tax subsidy to agricultural producers.

    External sector: Current account deficit in November shrunk to USD 0.1 bn because of lower merchandise trade deficit.

    Fiscal policy: The Parliament approved the State Budget Law for 2016, which is based on the number of amendments to the Tax and Budget Codes as well as other legislative acts.

    Privatisation: In eleven months of 2015, privatisation receipts reached UAH 145 m out of planned UAH 17 bn.

    Social policy: Social standards will be increased twice in 2016 (in May and in December); however, they will still decline in real terms.

    Labour market:Decline of real wage decelerated to 14.0% yoy due to slowdown in inflation as well as adjusting wages to the increase in minimum wage.

    Monetary policy: Headline CPI was up by 0.7% mom in December bringing inflation in 2015 to 43.3% yoy.

    Exchange rate: In December, interbank exchange rate moved in UAH 23-24 per USD range as in November.

    State debt:The Cabinet of Ministers put moratorium on repayment of Russian USD 3 bn Eurobond, scheduled on December 31, 2015.

    Issue:  No.1 (183) January 2016
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