Country Report Ukraine January 2009

Outlook for 2009-10

• The domestic political scene will remain highly uncertain and prone to instability in the run-up to the presidential election that is due in early 2010.
• Ukraine is unlikely to make significant progress towards membership of NATO over the forecast period. Should it do so, however, there would be a serious risk of a destabilising escalation in tensions with Russia.
• In order to restore financial and economic stability, the authorities will target a tightening of fiscal and monetary policies in 2009-10.
• The Economist Intelligence Unit assumes that enough reforms will be carried out to prompt the release of further tranches of IMF support in 2009-10. However, the risks to this outlook are considerable, given the lack of political consensus.
• The economy is expected to experience a deep recession in 2009, with real GDP forecast to contract by 6%, and to recover only slowly in 2010. The main downside risks to this outlook stem from the ongoing currency crisis.
• The currency will be sharply lower in 2009, and the current-account deficit is forecast to narrow as a result of reduced import demand.

Monthly review

• The Yuliya Tymoshenko Bloc (YTB) of the prime minister has signed an agreement with the nominally pro-presidential Our Ukraine-People's Self-Defence (OU-PSD) to re-establish their coalition.
• The YTB and the OU-PSD are joined in the new coalition by the smaller Lytvyn Bloc. However, the coalition lacks a reliable majority, as only a little over half of OU-PSD deputies signed up to the deal.
• There has been a sharp rise in political tensions over the currency crisis. MsTymoshenko has demanded that the president, Viktor Yushchenko, and the governor of the National Bank of Ukraine (NBU, the central bank) resign.
• An interim IMF mission to Ukraineundertaken before to the latest policymaking tensions arosedelivered a generally positive assessment of progress so far, but warned against political interference in the NBU's work.
• The government has approved revised, but unrealistic, economic assumptions for the draft 2009 budget, including real GDP growth of 0.4%.
• Ukraine has yet to reach a deal with Russia over its gas debt or gas supplies in 2009, risking a cut-off in supplies at the beginning of January.
• Real GDP plummeted by 14% year on year in November, and industrial output contracted by 30%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52