Country Report Ukraine April 2009

Outlook for 2009-10

• Domestic politics will remain extremely uncertain and prone to instability in the run-up to the presidential election in either late 2009 or early 2010. Risks to stability have increased in the light of the severe economic dislocation.
• Relations with Russia are expected to remain tense until the presidential election. The two leading contenders are likely to adopt a friendlier position to Russia than the incumbent, Viktor Yushchenko.
• The Economist Intelligence Unit assumes that the authorities will take sufficient policy steps to trigger the release of further tranches of IMF support. However, the risks to this outlook are considerable.
• There will be a deep recession in 2009: real GDP is now forecast to contract by 10%, and to recover only slowly in 2010. The main risks to the outlook stem from the uncertain outlook for the hryvnya and the banking sector.
• The currency will weaken sharply in 2009. The current-account deficit is forecast to narrow as a result of reduced import demand.

Monthly review

• In April parliament set the presidential election for October 25th, earlier than the previously expected date of January 2010.
• MrYushchenko is challenging parliament's decision at the Constitutional Court, but has said that he would agree to holding an early presidential election if it were held simultaneously with a pre-term parliamentary vote.
• An election to the regional assembly in Ternopil in western Ukraine was won by a right-wing nationalist party, Freedom, with 35% of the vote. The region was previously a stronghold for the prime minister, Yuliya Tymoshenko.
• The number of Ukrainians who say that they are prepared to take part in protests has increased, according to a poll in early March, to 42%, compared with 27% in December 2008.
• Some steps have been taken towards unlocking the second tranche of IMF support. However, parliament still needs to approve bills on supporting the state-owned energy company, Naftogaz, and on capping pensions.
• The EU has agreed to provide Ukraine with financial assistance to help to reconstruct and modernise its gas transportation system.
• Indicators of economic activity remained bleak in January-February, including a 57% year-on-year fall in construction output, a 33% slump in industrial production, and an 11% drop in retail trade.
• Year-on-year consumer price inflation declined to 18% in February, from 22% at end-2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;53;47
NAICS Code: 52;44;48