BNE IntelliNews: Ukraine Country Report, November 2016 - November, 2016

BNE IntelliNews: Ukraine Country Report, November 2016 - November, 2016

  • December 2016 •
  • 53 pages •
  • Report ID: 4579427 •
  • Format: PDF
Ukraine's economy has returned to growth and the list of reforms being put in

place is slowly getting longer. The economy expanded by 1.8% in the third

quarter and could end this year with about 2% growth.



However, that off a very low base after the double digit contractions of the last

few years. To put this in context the dollar value of Ukraine's GDP is about

$90bn, which is a tenth that of Russia: Ukraine is a big country with a small

economy at the moment.



Reforms are progressing and there has been very notable successes in energy

tariff realignment and the clean up of the banking sector has been stellar.

Also a start has been made on administrative reforms and the establishment of

the Anti-Corruption Agency is seen as key. The problem with the latter, and with

much of the anti-corruption drive, is it has no teeth so this is at best a half baked

change that is a step in the right direction but in of itself will not be sufficient to

produce any real impact on corruption.



The need for an effective anti-corruption drive has become the overweening

demand of Ukraine's international donors, particularly the IMF that has de facto

suspended its standby program until visible progress is made. The conditionality

that has been put on releasing IMF tranches has become very strict, but there

have been some distributions this year.

The lack of visible progress is also impacting domestic politics. The populous

has become very disillusioned and the ruling Party of Poroshenko would not

even pass the 5% threshold to enter the Rada if elections were held tomorrow.

President Poroshenko himself would come fourth in a presidential election,

which would be won hands down by former prime minister and populist firebrand

Yulia Tymoshenko.



Populist rhetoric is increasingly dominating the national debate and Tymoshenko

is threatening to undo some of the austerity measures like gas tariff hikes, in her

bid to win office. There is a growing danger that the whole reform drive will be

derailed in the process. Elections are not scheduled for another two years, but

the current pace of reforms are not fast enough to produce tangible

improvements by then.



If the government cannot win by delivering prosperity it can win by delivering on

integrity. However, this also unlikely as there seems to be little real commitment

to fighting graft and making root and branch changes to the system that has

been built up over the last 20 years. Instead Poroshenko has gone for capturing

the existing system and installing his people in key posts. This is the slow way to

make reforms.