Country Forecast Ukraine October 2014 Updater

Country Forecast Ukraine October 2014 Updater



  • The agreement of a peace deal with Russia-backed militias in September does not look especially stable and its conditions may not be fulfilled, but it could be enough to satisfy Russia's desire for control over Ukraine's political future. In mid-September the Verkhovna Rada (parliament) and the European Parliament ratified Ukraine's association agreement. At the end of the month the EU decided that there were no grounds for easing sanctions on Russia. A marked deterioration in relations between Ukraine and Russia, and between Russia and the West, will be a lasting outcome of the conflict.
  • Polls ahead of the end-October election show the bloc of the president, Petro Poroshenko, in the lead with 27% support. Fatherland, the biggest opposition group, is trailing in third place, behind the populist Radical Party. Pro-Euromaidan parties will dominate the new parliament. A broad consensus over the anti-corruption agenda could be under-mined by sharp differences over the peace deal with Russian-backed forces in the east.
  • Large capital outflows have left the hryvnya vulnerable to shocks, and another bout of rapid weakening in recent months has again increased the risk of financial and macroeconomic destabilisation. Inflation climbed steeply again in September, to 17.5% year on year. After depreciating for most of August and September the hryvnya has climbed again in recent weeks, stabilising at just below HRN13:US$1. Devaluation and higher energy tariffs will see a spike in inflation in 2014, and US dollar strengthening could keep it at a high rate in 2015.
  • In August the fall in industrial output accelerated to 21% year on year, linked to the disruption of production by the war. In July and August import costs dropped by 30-40% year on year, while export earnings fell by 20-30%. In 2014 armed conflict has also undercut confidence, and we estimate a fall in real GDP of about 8%. We forecast a weak pick-up in 2015. Tough reforms could lay the basis for faster growth in 2016-19.
  • In January-August 2014 the current-account deficit narrowed to US$2.7bn, less than one-third of its size in the year-earlier period. Import demand will contract sharply in 2014, causing the current-account gap to narrow markedly. The deficit will expand again in 2016-19, as domestic demand and profit repatriation begin to pick up.


Country Forecast Ukraine October 2014 Updater
Country forecast overview: Highlights
Country forecast overview: Key indicators
Country forecast overview: Business environment rankings
Country forecast overview: Ukraine's business environment at a glance
Fact sheet
Outlook for 2015-19: Political stability
Outlook for 2015-19: Election watch
Outlook for 2015-19: International relations
Outlook for 2015-19: Policy trends
Outlook for 2015-19: Fiscal policy
Outlook for 2015-19: Monetary policy
Outlook for 2015-19: Economic growth
Outlook for 2015-19: Inflation
Outlook for 2015-19: Exchange rates
Outlook for 2015-19: External sector
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Gross domestic product by sector of origin
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data summary: External debt
Data sources and definitions

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