Country Report Ukraine October 2011
Market Research Report

Country Report Ukraine October 2011 Market Research Report

Outlook for 2012-16

• The president, Viktor Yanukovych, is expected to keep a grip on power in 2011-15, including through control of parliament and the government. The erosion of some of the gains of the "Orange Revolution" will continue.
• Relations with Russia are likely to remain tense, owing to contentious gas agreements and the expected deepening of Ukraine's economic links with the EU.
• 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, the same as in 2010, supported by investment and export growth. In 2012 growth is forecast to dip to 3.8% owing to weaker export demand growth, before strengthening in 2013-16.
• With pressure easing in the second half of 2011, owing to lower food prices, we estimate average inflation of 8.5% 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 over the forecast period, at 4.5% of GDP or less, as domestic demand will be much more subdued than in the years preceding the economic crisis.

Monthly review

• The case against Yuliya Tymoshenko, the former prime minister who is on trial for abuse of power when she signed a gas deal with Russia in 2009, was adjourned unexpectedly for a second time, for 11 days, on September 30th.
• Mr Yanukovich met the president and prime minister of Russia to discuss the gas agreement between the two countries. Both sides suggested that progress had been made, but no firm details were given. Further negotiations are likely.
• The draft 2012 budget targets a deficit equivalent to 2.5% of GDP, down from a planned deficit of 3.5% in 2011, including deficits in the pension fund and Naftogaz, the state energy holding.
• In August strong harvests continued to boost agricultural output. Industrial production also fared well, expanding by 9.6% year on year, compared with an average of 8.7% year on year in the previous three months.
• Volume growth of retail sales remained strong in July and August, averaging 15.1% year on year, despite slowing real wage growth.
• Consumer prices declined in August by 0.4% month on month, following a 1.3% decline in July. As a result, year-on-year inflation slowed to 8.9%.

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