Page 6 - UKRRptNov18

The EBRD says fast-growing real wages and remittances had stimulated household consumption, while domestic investment in fixed assets had continued to grow apace in the first two quarters of 2018, albeit at a slower rate compared to the same period of the previous year.
Headline inflation remained elevated at 11.4% year-on-year in the first nine months of 2018 , well above the medium-term inflation target of 5% plus-minus one percentage point, although the rate of inflation slid into high single digits between June and September.
On this front the National Bank of Ukraine (NBU) has shown some real backbone and hiked rates four times this year to deal with inflation which is in retreat as a result. The central bank has asserted its independence from the government which would much rather see some growth boosting rate cuts. Monetary policy rates are now a bruising 18%, which is suffocating investment and the bank sector, but the painful hikes have brought stability and allowed the NBU to protect its hard currency reserves. The inflation forecast in 2018 was improved by 0.1 percentage points, to 10.9%, and in 2019 by 0.7 percentage points, to 7.3%.
Without an IMF programme Ukraine’s international reserves have slowly shrunk as the government waits for the release of the next $1.9bn tranche from the International Monetary Fund (IMF). Ukraine's forex reserves declined by 11.5% in the first nine months of this year, or $2.17bn which has been putting pressure on the hryvnia. The available reserves cover 2.8 months of the future imports, which is slightly less than economists believe is necessary to maintain the stability of the national currency.
The other big event to watch out for in the coming months is the privatisation of a controlling stake in Ukraine’s most attractive utility Centrenergo that is slated for December 14. The sale should entice foreign investors but the poor business environment will pose a problem.
6 UKRAINE Country Report November 2018 www.intellinews.com