Shadow economy as a % of official GDP of Ukraine

Consensus forecast for Ukraine in 2010: moderate growth is coming.

Members of the regular public consensus forecast improved forecast of economic growth in Ukraine in 2010 from 3,5% to 4%. However, the average expected fiscal deficit worsened immediately by 30 billion hryvnia - up to 85 billion hryvnia (7.4% of GDP). According to the median forecast of participants, in 2010 nominal GDP will exceed a trillion hryvnia.

The consensus forecast of economic growth was improved due to accelerating consumption (+0.4 percentage points compared with the forecast of December 2009) and investment (+0,6 percentage points). Among the sectors, the best expected dynamics is for the the industry (6.8%) and transport (6%). The most dynamic industries in 2010 promise to be mechanical engineering (11.3%) and steel (+10%).

The participants of the forecast improved their outlook for employment. Expected unemployment rate fell by 0.5 percentage points to 8,5% among people 15-70 years old (the methodology of the ILO). At the same time, the expected growth of real incomes of the population remains at that level of 2% (while some have predicted the fall of this index).

Analysts and research institutions, banks and other financial institutions have kept the average forecast exchange rate at 8.20 UAH / USD. (range of forecasts narrowed to 7,80-8,80).

Forecasts of inflation are sharply volatile. Average growth of CPI (December to December) was 13,3%, despite the fact that the maximum projection of one of the participants reached 20%. Prices of industrial producers will grow faster than the consumer, that is clearly associated with an acceleration in the industry.

Forecasting budgetary performance remains a matter of great difficulty for the participants because of lack of information about the actual state of the treasury. The outlook on the state of public finances has provided only half of participants.
In 2010, the deficit of public finances ranges from 4,4% to 9,8% of GDP. The main source of deficit is external borrowing. Participants of the consensus forecast also believe that the capitalization of banks may require from 10 to 25 billion hryvnia public funds this year.

The data for the current wave of the consensus forecast was provided by Astrum Investment Management, Concorde Capital, Dragon Capital, Erste Bank, FOREX Club, Gainsfort Research, OTP Bank, BTA Bank, Institute for Economic Research and Policy Consulting, International Bleyzer Fund, Ukrainian business magazine "Expert", investment group "Socrat", International Center for Policy Studies.

The results of the consensus forecast (average, minimum and maximum difference between the minimum and maximum values, the number of forecasts for each parameter), as well as assumptions that guided the participants in forecasting, attached to this release. Information about prognosis in the context of each participant is closed, since 6 out of 13 participants were asked not to disclose details of their forecasts.

Consensus forecast project is conducted by Expert business magazine.

If you want some additional info regarding macroeconomic or sectoral forecasts for Ukraine in 2010 please contact Igor Lutsenko (ilutsenko at gmail.com).

Trade deficit contracted by 9.6 times in 2009

Ukraine's trade deficit decreased by 9.6 times in 2009 to $1 bn 380.7 mln against $13 bn 307.6 mln in 2008. Negative balance of trade in goods in 2009 was $5 bn 732.7 mln, and positive balance of trade in services was $4 bn 352 mln against $18 bn 580.9 mln and $5 bn 273.3 mln respectively in 2008.

Q4 2009 GDP of Ukraine is down 7%,

GDP of Ukraine in fourth quarter of 2009 in comparison to the same period in 2008 was down 7% in constant prices of 2007 (preliminary figures of Ukrainian Statistics Committee). 

Earlier president Victor Yushchenko has said that GDP was down 15% in 2009. 

In Q1-Q3 decreases in GDP were 20.3%, 17.8% и 15.9% respectively.

Freight transit through Ukraine has grown in 2009 due to pipelines

	Freight transported through Ukraine in 2009, thousands of tons	In % to 2008
Freight transit overall	337000.08	103.6
including
Rail	63780.00	68.3
Road	3394.74	69.2
Sea	1937.16	55.6
River	0.12	02
Air	1.17	76.1
Pipelines	267811.46	119.8
Other	75.43	71.5

Ukrainian banking sector registers losses in 2009

In 2009 Ukrainian banks has lost UAH 38,45 bn (~$4.76 bn) in comparison to the profits of UAH 7.3 bn (~$0.9 bn) in 2008 Association of Ukrainian Banks reports. 

As of January 1 2010 assets of the banking system were at the level of UAH 880.3 (~$109 bn). During 2009 assets decreased by UAH 45,8 bn. 

The main cause of assets decrease was the decrease in credit operations, which account for 79.2% of all assets. The level of bad loans increased by 3.88 during the last year. 

Liabilities of the banks also decreased by UAH  41.7 and were at the level of UAH 765.1 bn (~ $94.8 bn)

Statutory fund of the banks has increased by 44.6% in 2009 to the level of UAH 36.9 bn (~$4.54 bn). Source.

Ukraine's currency reserves decrease

National Bank's currency reserves decreased by 4,6% or by $1,219 bn to the level of $25,286 bn due to the decrease in currency volume held by the NBU. According to the NBU's data its position as of now consists of the foreign currency for $24.273 bn, gold reserves for $949,19 mln., special borrowing rights - $0,063 bn and reserve position in IMF - $0,3 mln.

In 2009 international reserves of the regulator decreased by16% or by $5.038 bn.

Ukraine: it is somewhere between Togo and Liberia

Heritage Foundation and Wall Street Journal publishes 2010 Index of Economic Freedom. Ukraine occupies proud last place out of all European countries and 162 out of 179 evaluated countries, finding itself just between Togo and Liberia. Ukraine gets high scores for Fiscal, Monetary and Trade Freedom, but is ranked quite low in Business, Investment, Financial freedoms. Also Ukraine gets low scores on Property rights protection and Freedom from Corruption. Source

Apparently biggest opportunity for Ukraine lies in improving its business climate, property rights protection and fighting corruption. These tasks are no surprise and have been apparent for years, however, they have never been popular with Ukraine's political elite.

Industrial production down 21.9% in 2009

Statistics Committee presented the data on industrial production in 2009. It appears to be down 21,9% compared to the previous year. Chemical industry is down 23.2% and steel industry srinked by 26.6%, both industries, however, stabilized in the end of the year. Volyn' region suffered the highest "de-industrialization" with industrial production falling 48.3% (however, not many people were suspecting that there was much industry in Volyn' oblast in the first place).

The growing production in 2009 was noticed in gas extraction, meat, sunflower oil, gasoline and vodka production. Source

Freight turnover is down 22% in 2009

Freight turnover is down 22% in 2009 compared to 2008 says State Statistics Committee. Most of the freight in Ukraine is transported by railway and pipelines. While railways mainly service steel sector, pipeline transport's main client is Russian transit gas going to Europe. Both these sectors were hard hit in 2009: railway freight turnover contracted by 24% and pipeline freight turnover by 21%. These numbers reflect downfall in steel production and contraction of the Russian transit gas volumes going through Ukraine.

Source.

Ukraine's retail down 20% in 2009

State Statistics Committee publishes the info on retail trade and restaurant business turnover in 2009. It appears that the number is down 20% in 2009 compared to 2008. In 2009 turnover in the retail sector was UAH 229.9 bn, which is about $28.5 bn at the current exchange rate. It is likely that the downfall in retail turnover is not over yet and is to continue in 2010.

The city of Kyiv is down 22%. Donetsk oblast is the leader in retail contraction - 26%, while Kyiv oblast (excluding Kyiv) turned out to be the most resilient to contraction - only 9.8% down.

Source

Deficit of Ukraine's foreign trade in goods over eleven months shrinks by 3.7 times

The deficit of Ukraine's foreign trade in goods January through November 2009 was estimated at $4.815 billion, which was 3.7 times down on the same period in 2008 ('minus' $17.857 billion), the State Statistics Committee reported.

The export of goods in the eleven months was estimated to be worth $35.603 billion (56.6% of the January-November 2008 period), and imports amounted to $40.418 billion (50.1%).

As the State Statistics Committee said, the deficit of Ukraine's foreign trade in goods was due to trade in certain groups of commodities – energy materials, oil and fuel ('minus' $11.2 billion), pharmaceuticals ('minus' $1.743 billion), and polymers and plastic materials ('minus' $1.583 billion).

The ratio of coverage of imports by exports January through November 2009 was 0.88, whereas in the same period last year it was 0.78. Source.

FDI into Ukraine drops almost trifold in 2009

Ukraine has been hard hit by the credit crunch and the crisis. As a result of that FDI into Ukraine drops almost trifold in first 9 months of 2009. From $8 bn in the first 9 months of 2008 to $2.97 bn in the same period of 2009. It is the city of Kyiv that got most of the FDI flow, receiving $1.2 bn. Other top performers include Kharkiv, Lugansk, Lviv and Kyiv oblast. Disinvestment was occured in Chernigiv and Poltave oblasts.

During the times of independence Ukraine got $837.5 of FDI per capita, provided the population shrinks that number has a built-in improvement trend... Source.

Ukraine's macro outlook for 2010 according to UkrSibBank

Ukrainian economy is to deliver moderate (2.7%) growth next year, bouncing
back from distressed levels. Consumption would remain broadly stable in
nominal terms providing opportunities for import substitution. Growth is to
be net-export driven.

Some adjustments take place in current account and export mix, improving
resistance to possible fluctuations on steel market. Still, vulnerability of

Ukrainian economy to movements of global steel prices remains
pronounced. Ukraine would see C/A surplus next year due to weak currency.

Ukraine will go through election cycle in early 2010, while the IMF
cooperation is likely to be frozen for some time.

Public finance will see the second consecutive year of double-digit deficits
as a percentage of GDP. The budget is likely to be redrafted with
participation of IMF technical experts over 2010.

CPI is declining due to subsiding pressures on demand side, but it would
remain high slipping in single-digit zone only in 2011.

Local currency is cheap comparing to CEE peers, but high public deficits
coupled with Ukraine’s sensitivity to global conjuncture introduce downside
risks over the course of 2010.

Banking system can cope with asset quality, albeit it might still need capital
injections and would not be able to restore growth soon. Central bank
should seek ways to inject UAH funding to the system.

Domestic interest rates are well in double digits and would remain high in
1H2010 due to crowding-out by public debt, de-leveraging of external debt
and limited inflow of deposits to domestic banking system. From 2H2010
onwards we expect domestic rates to decline.

Full Report

World Bank improves outlook for 2010 Ukraine’s GDP growth

World Bank experts think 15 percent GDP contraction in 2009 to be a realistic estimate. For 2010 GDP growth of 2.5% is expected mainly due to improved export demand. Stress in the global financial conditions is expected to slow down the pace of recovery. Strained private sector finances will constrain investment, while continued labor market adjustment and cost cutting strategies in the corporate sector will weigh down on consumption demand. WB expects inflation to fall to below 14% by end-2009 and to below 11% by end-2010. Source.

EBRD: Ukriane is a leader in economic downfall

Annual EBRD Report says that Ukraine has suffered economically more than any other country of Eastern Europe and Central Asia. Ukraine heads the list of 29 countries and is in the top 5 with double digit GDP downfall. As 2009 ends the downfall is predicted to be around 14-15%. For comparison, GDP of other coutries in Eastern Europe will contract in 2009 for about 6.3%.

Several factors are responsible for such a downfall in Ukraine:

• Decrease in demand for Ukrainian exports abroad
  
• Price decrease for steel and chemichals
• Imported gas price rise
• Contraction of FDI for the first time in 10 years.

Source