Highlight: External trade
Since 2014 Ukraine’s exporters are feeling impact of armed conflict in the Eastern Ukraine and receive less and less dollars for their products due to plummeting prices for steel, wheat and many other commodities. Since January 1, 2016, exporters face additional obstacles for sale of goods to Russian purchasers. At the same time, Ukrainian importers received some relief. On January 1, 2016, provisional application of the deep and comprehensive free trade area (DCFTA) with the EU started, which lowers duties on the EU goods. Import duty surcharge (at 5-10%) was cancelled. In this issue we try to analyse impact of these events on international trade.
Politics: Ukraine is on the brink of a government crisis. The most likely scenarios for the future include further decrease in political stability, which would block or slow down reforms and might end up in a snap parliamentary election.
Real sector: By December, 2015, drop in industrial output slowed to 2.1% yoy. This reflected high statistical base in the first half of 2014 as well as adjustment of supply chains and stabilization of economy in second half of 2015.
Energy sector: There is a serious warning to the state of information security at Ukrainian energy companies.
Agriculture: Gross agricultural production in 2015 decreased by 4.8%.
Transport: In January, Russia changed the transit rules for Ukrainian road carriers delivering goods to Kazakhstan.
External sector: Current account in December, 2015, turned to surplus of USD 0.4 bn due to balanced merchandise trade.
Fiscal policy: Burst of spending in the last weeks of 2015 does not conform to the best practices in public financial management.
Privatisation: In 2016, the Government plans to receive UAH 17.1 bn (USD 660 m) from privatization.
Social policy: The coverage of households by the housing and utility subsidies increased significantly.
Labour market: Average nominal wage in December, 2015, grew by 30.4% yoy due to wage indexation and minimum wage increase. Real wage decreased by 9.9% yoy.
Monetary policy: Consumer inflation in January remained moderate at 0.7% mom due to downward trend in crude oil prices and a number of one-off factors.
Exchange rate: Hryvnia in January lost 6% of its value vs. US dollar.
State debt: Increased political instability might result in further postponement of the third tranche of the IMF loan.
