Ukraine Country Report Feb17 - February, 2017

March 6, 2017

Ukraine's economy has been in recovery since 3Q15, for the past year and a half. The 2016 full-year real GDP rose 1.4% YoY. The current trend data derived from seasonally adjusted series of monthly output volumes from key sectors of the economy—from industry to agriculture, and from trade to construction and transportation—yield a 2.2% real GDP increase in 2017.

January saw a surprise jump in badly needed exports with even the exports to Russia almost doubling, bring the current account close to breaking even and it is hoped that this trend can be maintained. Also the government budget benefited from much better than expected tax take, mostly from rising VAT payments.

However, in the negative column a blockade on Donbas that will stop coal shipments could derail the economic recovery as coal is used to both produce exported steel and generate electricity across the country.

The IMF is said to be close to dishing out its next $1bn in support, but the decision has been repeatedly delayed and was originally slated to happen in January. At the moment the government can get by without the funds, and staying in the program will be hard as most of the reforms the IMF are demanding are socially painful.

Rada has rejected the idea of early elections again, as they did last year. However, the popularity of the government continues to fall and another reshuffle is looking likely. PM Groysman’s government will smoothly enter its second year in office in mid-April, as attempts to stage a vote of confidence in parliament are likely going to be sidelined.

PM Groysman tries to play nice with IFIs (international financial institutions) by adhering to the IMF programme, while at the same time actively seeking to boost the economy. This tactic will keep the occasionally rebellious Radical Party, which holds 21 seats in parliament, at bay. They will likely support the Groysman government when it counts.

Reforms have stalled again and the next tranche of the IMF program was due in February, but is unlikely to come until March at the earliest.


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