Country Forecast Ukraine October 2015 Updater

Country Forecast Ukraine October 2015 Updater



  • Threats to Ukraine's political stability are numerous, including external and financial destabilisation, resistance by vested interests to reform and the divisive actions of independent nationalist militias. Fighting in the Donbas has ebbed further with the onset of Russia's military intervention in Syria, but the second Minsk ceasefire remains likely to lead to a frozen conflict.
  • The decision to press ahead with a special status law in the Donbas before local elections there, following a meeting of the so-called Normandy Four group in Paris on October 2nd, could widen domestic political divisions. Delay in negotiating and passing the special status law could leave Ukraine open to blame for a failure of the Minsk II process overall.
  • An IMF programme aims to stabilise the currency and public finances, but tight fiscal and monetary policies are exacerbating the recession, undermining support for the government's Westernising agenda.
  • The debt-restructuring initiated in September has underpinned continuing gradual improvement in key financial indicators-such as the exchange rate, reserves, capital flows and bond prices. The Economist Intelligence Unit expects a US$3bn debt owed to Russia to be paid in full in December. The goal of reducing public debt to 71% of GDP by 2020 will be difficult to achieve.
  • In late September the National Bank of Ukraine (NBU, the central bank) again reduced the main policy interest rate, this time by 5 percentage points, to 22%. In September month-on-month inflation shot up again, by 2.5%, after two months of deflation. Hryvnya weakness and further "front­loaded" price increases for utilities will keep inflation very high in 2015-16.
  • The fall in industrial output slowed to 5.7% year on year in August, but agricultural output deteriorated. Concerns about the labour market outlook are behind a downward revision to our estimate for real GDP in 2015, to -11.1%, from -10% previously. Improved external conditions will see a weak recovery in 2016. We forecast annual average growth of 3.2% in 2017-19. Downside risks include a return to war or financial turbulence, and the failure of reforms.
  • The improvement in the trade account was responsible for a sharp contraction in the current-account deficit in January-August 2015, to just US$133m, from a deficit of US$2.35bn in the first eight months of 2014. The current-account deficit will widen again from 2016.


Country Forecast Ukraine October 2015 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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