Country Risk Service Ukraine September 2011
Market Research Report

Country Risk Service Ukraine September 2011 Market Research Report

Overview

The president, Viktor Yanukovych, is expected to retain a firm grip on power. There will be some erosion of the democratic gains of the "Orange Revolution". Relations with Russia have improved, but new tensions have arisen. The lending agreement with the IMF will guide economic policy in 2011-12, but there is a high risk that compliance will be patchy. The government will target a narrowing of the budget deficit, and limited further progress on pro-market reforms is likely. The economy grew by 4.2% in 2010. The Economist Intelligence Unit forecasts that growth will remain at 4.2% in 2011, supported by higher steel prices, before slowing to 4% in 2012 as the external environment deteriorates. It is then forecast to average 4.4% annually in 2013-15. Inflationary pressure is forecast to ease in the second half of 2011 and further in 2012, owing to lower food and commodity prices. The current-account deficit is expected to remain broadly contained.

Key changes from last month

Political outlook

The trial of the previous prime minister, Yuliya Tymoshenko, has attracted international criticism, as has her incarceration for contempt of court at the beginning of August. The pursuit of court cases against opposition figures could delay a free-trade agreement currently being negotiated with the EU.

Economic policy outlook

A continued failure by the Ukrainian authorities to meet the conditions agreed with the IMF under the current stand-by arrangement has caused a new delay in unfreezing disbursements from the Fund. In late August, the IMF announced that its next monitoring mission to Ukraine would not take place until late October.

Economic forecast

Growth of agricultural output accelerated from 3.2% year on year in January-June, to 9.1% in January-July, as Ukraine enjoyed bumper harvests. Agricultural output should help to buttress growth in the third quarter amid a worsening external environment. Growth of industrial output in July slowed to 8.7% year on year, from 8.9% in June.

This report covers the following industry codes:
SIC Code: 60;49;53;2834
NAICS Code: 52;22;44;3254

• Ukraine at a glance: 2011-15
  • Risk assessment
  • Sovereign risk
  • Currency risk
  • Banking sector risk
  • Generic risks
  • Country risk
  • Rating definitions
  • Central scenario for 2011-15: Political stability
  • Central scenario for 2011-15: Election watch
  • Central scenario for 2011-15: International relations
  • Central scenario for 2011-15: Policy trends
  • Central scenario for 2011-15: Fiscal policy
  • Central scenario for 2011-15: Monetary policy
  • Central scenario for 2011-15: Economic growth
  • Central scenario for 2011-15: Inflation
  • Central scenario for 2011-15: Exchange rates
  • Central scenario for 2011-15: External sector
  • Central scenario for 2011-15: External financing requirement
  • Central scenario for 2011-15: External debt
  • Key risk indicators
  • Ratings summary
  • Quarterly indicators
  • International assumptions summary
  • Economic structure
  • Public finances
  • Exchange rates, interest rates and prices
  • Financial sector
  • Current account
  • International liquidity
  • Foreign payment and liquidity indicators
  • External trade
  • External financing requirement
  • External debt stock
  • External debt service