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Archive 2016

  • Monthly Economic Monitor Ukraine No.5 (187)

    11.05.2016
    Free

    Highlight: Gas tariffs

    On April 27, ahead of the schedule agreed with the IMFthe Ukrainian government introduced a new mechanism for setting the price of gas for households tying it to import prices.In the Memorandum with the IMF Ukraine committed to abolish “the two-tier pricing structure and raise the household price as needed to reach 75% of the level consistent with import parity in April 2016 and 100% of that level in April 2017”. According to the schedule of price increases devised by the National Energy and Utilities Regulatory Commission (NERC) in February 2015, there were planned three stages of price increases: in March 2016 by 23%, in September 2016 by 26% and in March 2017 by 26%. While March-increase in tariff was cancelled due to political crisis, the new government headed by Volodymyr Groysman decided to go all the way in one big jump.

    The Ministry of Economic Development and Trade on April 27 explained that the new tariff at UAH 6879 per 1000 cubic meters takes into account the wholesale gas price (at UAH 4942 per 1000 cubic meters), which was formed based on: the forecast gas price at German gas hub NCG; transportation costs from NCG to the western Ukrainian border via Germany, Czechia and Slovakia; and tariffs set by the NERC for transportation of gas via gas network of Ukraine. In particular, the marginal level of retail prices of UAH 6879 then takes also into account the weighted average tariff for transportation (UAH 219), the weighted average tariff for distribution (UAH 513.7), the trade margin for the supplier (UAH 57.4), and VAT. However, several issues remain. 

    Politics:In April, new Government was appointed. This allows resuming reforms required for further financial support of Ukraine by the IMF and other official international donors.

    Real sector: Most industrial sectors improved their performance in March due to higher external and domestic demand as well as low statistical base of last year.

    Energy sector:Gas and heating tariffs were increased ahead of previously announced schedule.

    Agriculture:Gross agricultural production in March decreased by 1.0% yoy.

    External sector: Current account in March was in deficit at USD 0.4 bn.

    Fiscal policy: Growth of consolidated fiscal revenues decelerated to 9.6% yoy in March.

    Privatisation: The State Property Fund of Ukraine failed to announce the starting price and conditions for the privatization of Odesa Port Plant.

    Social policy: The Government announced sharper increase in subsistence minimum in December 2016.

    Labour market:Average nominal wage in March grew by 27.4% yoy to UAH 4920.

    Monetary policy: Consumer inflation slowed to 9.8% yoy in April.

    Exchange rate: In April, hryvnia appreciated slightly from over UAH 26 per USD in the beginning of April to under UAH 25.5 per USD in the last weeks of the month.

    State debt:In April, Ukraine received EUR 400 m loan from the European Investment Bank.

    Issue:  No.5 (187) May 2016
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