Monthly economic monitoring

  • Monthly Economic Monitor Ukraine No.1 (207)


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    2017 was a year of hopes that had a mixed record in coming true. In international relations there were a number of successes including visa-free regime for short-term travels of Ukrainians to the EU, the introduction of free trade area with the Canada and the full implementation of Association Agreement between Ukraine and the EU. Ukraine was able to return to the international capital markets for the first time since 2013. The Parliament finally approved the healthcare reform law, which means that the reform of primary healthcare starts in 2018. The approval of the Education Law became controversial. It means important changes in the status of education establishments and modernisation of education curriculum; but its provision on language of teaching was heavily criticised by Hungary and Poland. Approved pension reform only partially reflected the obligation of country in the framework of the IMF program as higher requirements of working record were complemented by higher than previously expected increases in pensions. At the same time, the Government failed to approve the land market reform. Instead, the Parliament extended the moratorium on agricultural land sales for another year. The privatisation law and the law on credit registry were not approved. The automatic inspection of e-declarations was not also introduced. The Anti-corruption court was not created The Government also did not increase gas tariffs for population as it was previously planned. As a result, Ukraine did not receive scheduled for 2017 two tranches of IMF loan and the final tranche under the MFA III..

    Economic recovery was lower than previously expected: real GDP is estimated to grow at about 2.2% in 2017. Low growth is partially explained by the blocked of trade with the occupied part of Donbas. Inflation was significantly higher than the NBU target due to rapid increase in minimum wage and growth of commodity prices. 

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    Executive summary

    Highlight: Year 2017

    Politics:In December, the Arbitration Institute of the Stockholm Chamber of Commerce issued the final award ruling in the dispute between Ukrainian oil and gas company Naftogaz and Russian gas supplier Gazprom.

    Real sector:Improved consumer confidence, growing household incomes and recovery in corporate investment spending supported real GDP growth at 2.1% yoy in the third quarter of 2017.

    Energy sector:The National Energy and Utilities Regulatory Commission regained its quorum for the next three months.

    Agriculture:Between January and November, the agricultural production declined by 2.8% yoy due to decrease in crop production at 3.8% yoy.

    External sector:Current account was nearly balanced in November with USD 18 m surplus as compared to USD 315 m deficit in October.

    Fiscal policy: Consolidated fiscal expenditures in 2017 were lower than planned primarily due to lower fiscal deficit.

    Social policy: Real disposable income grew by only 0.2% yoy due to the accelerated inflation..

    Labour market: Unemployment rate (ILO methodology) in the third quarter of 2017remained almost at the level of last year: 8.9% of economically active population in the age between 15-70 years old.

    Monetary policy: Consumer inflation moved to 13.7% yoy in December as CPI increased by 1.0% mom.

    Exchange rate: Interbank UAH/USD exchange rate gradually weakened in December, what reflected seasonal surge in imports in December.

    State debt:In December, domestic government borrowings increased substantially after the Ministry of Finance increased yields.

    Issue:  No.1 (207) January 2018
    Attached file  (283.5 kb)
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