Ukraine

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15:13 PM Thursday, September 21, 2017
Finance
Ukraine Punches Below its Weight with 2.4 percent Q2 GDP Growth
Timothy Ash
Ukraine GDP Should Grow by 4 to 5 percent a year;
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

LONDON -- 2.5% real GDP growth for Q2 2017 is being hailed as a big positive in Russia - so 2.4% for Ukraine is not that bad under the circumstances. Consider the considerable headwinds still facing the Ukrainian economy: disruption to trade with Russia/CIS; war in East - which inevitably subdues domestic and foreign investment; domestic political uncertainty, reflected in the earlier year disruptive blockade, etc.

But Ukraine, from a low base, inevitably has the ability to grow at 4-5% per annum. This would be easy given the competitive currency, cheap, skilled labor, strengths in agro sector, IT, etc.

But it needs to generate good news flow about the business environment. This means cracking the whip on the anti-corruption agenda. That is still a work in motion, and it’s hard to sell Ukraine as having a great environment to do business.

Ukraine's currency, the hryvnia has hovered around 25.5 to the dollar for the last 20 months. (UNIAN)


Timothy Ash is senior sovereign strategist for BlueBay Asset Management in London


Ukraine’s Economy Heads Deeper Into Low-Growth Rut

By Volodymyr Verbyany and Daryna Krasnolutska
(Bloomberg) -- Ukraine’s steady economic expansion barely
budged last quarter as reform delays and difficulties in key
industries further cemented the eastern European nation’s low-
growth trajectory.

Gross domestic product rose 2.4 percent from a year earlier
between April and June, after it advanced 2.5 percent in the
previous three months, the State Statistics Office said Monday
in preliminary data. That’s lower than the 2.5 percent median
estimate of five economists in a Bloomberg survey. GDP rose a
seasonally adjusted 0.6 percent from the first quarter.

Aside from a late-2016 surge, the ex-Soviet economy hasn’t
produced much of a rebound from its two-year slump following a
second pro-European revolution in a decade. Growth has also been
constrained by a continuing trade embargo with the rebel-held
east -- home to many metals plants and coal mines -- and
unfavorable weather for the grain crop, an increasingly
important export. Economic revamps under a $17.5 billion bailout
have stalled once again.

Given the deep recession that ended in 2015 and last year’s
modest recovery, the latest GDP data aren’t “particularly
spectacular,” said Oleksiy Soroka, a portfolio manager for
emerging-market debt at Allianz Global Investors in London. “A
fresh reform push is required to unlock further growth
opportunities going forward and reduce the country’s dependence
on commodity sectors.”

The outlook is for an even slower expansion.

The central bank trimmed its 2017 GDP forecast to 1.6 percent from 1.9
percent last month, citing weaker business activity as well as
the blockade and a weaker harvest. Even so, faster inflation
prompted it to keep interest rates unchanged for a second
meeting.

The government said Monday that GDP, which surged as
quickly as 6.7 percent on an annual basis before the latest
recession, will probably rise between 1.8 percent and 2 percent
this year.

“A normal pace of economic growth for a country such as
Ukraine would be from 4 percent to 5 percent quarterly,” says
Oleksiy Blinov, head of research at the Ukrainian unit of
Russia’s Alfa Bank.

While the IMF has devised a package of reforms to perk up
growth, they’ve become bogged down amid opposition from factions
of the political class who benefit from the current system.

Delayed initiatives include overhauls of the land and pension
systems, as well as the creation of an anti-corruption court to
help kick start faltering efforts to boost transparency.

--With assistance from Andre Tartar.


To contact the reporters on this story:
Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net;
Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

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