Country Report Ukraine November 2011
Market Research Report

Country Report Ukraine November 2011 Market Research Report

Outlook for 2012-16

• The president, Viktor Yanukovych, is expected to keep a grip on power in 2012-15, including through control of parliament and the government. Public disillusionment with the president, however, may boost the opposition.
• Relations with Russia have been tense, owing to gas disputes and Ukraine's stated intention to push for deeper economic links with the EU.
• If relations with the EU continue to deteriorate, Russia will have a better chance to gain greater influence over the Ukrainian economy.
• The IMF programme will guide policy during the first half of the forecast period. The government will target a narrowing of the budget deficit, although it may continue to drag its feet with regard to unpopular reforms.
• Real GDP growth is estimated at 4.2% in 2011, supported by domestic demand and export growth. In 2012 it is forecast to dip to 3.4% owing to weaker export demand growth, before strengthening in 2013-16. Risks are on the downside.
• With pressure easing in the second half of 2011, owing to lower food prices, we estimate average inflation of 8.3% in 2011. Inflation is forecast to moderate in 2012-16, assisted by tighter fiscal and monetary policy.
• The current-account deficit is expected to be contained in 2012-16, at less than 5% of GDP on average. The economy is more balanced than before the economic crisis in 2008, but is vulnerable to a shortage of external financing.

Monthly review

• On October 11th Yuliya Tymoshenko, the previous prime minister, was sentenced to seven years in prison, casting into doubt closer relations between Ukraine and the EU.
• At the start of October concern about the economic health of Ukraine sharpened with news of a large fall in the stock of foreign reserves of the National Bank of Ukraine (NBU, the central bank).
• The NBU had supported the hyrnvya with large sales of foreign currency. This was triggered to meet increased demand for foreign currency from the population, amid anxiety about the prospect of hyrnvya depreciation.
• In September metallurgical output decreased by around 4% month on month, with the average daily production of steel falling by 1.5%.
• Although the current-account deficit widened markedly, to US$4.5bn, in January-August, the balance of payments recorded a surplus of US$2.1bn, owing to strong inflows on the financial account.
• The government has lifted most export duties on grain. This might boost grain exports, which underperformed in recent months despite the strong harvest.

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11

Please Note: Due to the Nature of This Report The Toc is Not Available