Highlight: YEAR 2016
2016 became a year of start of the economic recovery path. Real GDP growth in 2016 is estimated at 1.4%. It was supported by higher domestic demand. In particular, real private final consumption increased due to higher disposable income primarily attributed to increase in wage income. Investments increased due to higher commercial and residential construction, larger government financing of infrastructural projects as well as the implementation of delayed modernisation projects. At the same time, real net exports made negative contribution to economic growth due to decline in real exports as Russia imposed ban on imports of many Ukrainian products and restricted transit of Ukrainian goods to other countries through Russia’s territory. Besides, Ukrainian companies suffered losses due to military conflict in the East of the country. Necessity to maintain support by the IMF and other official international donors at the time of difficult economic situation pushed the Government to continue implementation of reforms. The Public Procurement Law was fully implemented, which means that since 2016 all public entities should conduct procurement above certain threshold on the basis of electronic platform ProZorro. The Government has also moved forward the reform in energy sector imposing the import parity price on gas sold in Ukraine regardless its origin. E-declarations became another important win of the year 2016. The Parliament also approved important laws on the judicial and tax reforms, which are to become wins of 2017, if fully implemented.
Politics: In December, the Government nationalized the PrivatBank, the largest private bank in Ukraine, after it failed to increase capital according to schedule.
Real sector: Real GDP growth accelerated to 2.0% yoy in the third quarter of 2016 as domestic demand increased.
Energy sector: Negotiations between Ukraine and Russia on the conditions of gas supplies in heating season 2016/17 failed in December 2016.
Agriculture:In 2016, Ukraine fully used tariff-free quotas on exports of honey, sugar, processed tomatoes, barley, maize, and poultry to the EU.
External sector: Current account deficit narrowed to USD 165 m in November 2016 due to positive net inflow of primary income and lower net outflow of investment income.
Fiscal policy: In the end of December, the Parliament approved the State Budget for 2017 and amendments to the Tax and Budget Codes.
Social policy: The number of households that received housing and utility subsidies reached 6.1 m (40.5% of total number of households).
Labour market: Since January 2017, minimum wage was increased to UAH 3200 from UAH 1600 in December 2016.
Monetary policy: Double-digit inflation in 2016 reflected higher energy prices for households, rising gasoline prices and excises on tobacco and alcohol.
Exchange rate: Interbank exchange rate weakened gradually to UAH 27 per USD in December.
State debt:State debt increased in December as the Government supported the Deposit Guarantee Fund and recapitalized the PrivatBank.