Page 43 - Eastern Europe Outlook 2020

If growth does boom then the cost of the warrants is a “champagne problem,” Jaresko told ​bne IntelliNews i​ n November. “If the economy is growing that fast then there will be money to pay for the warrants, more can easily be raised on the debt market, or these instruments will be restructured, which is what a lot of people believe.”
The government has called for 7% growth rate in the coming years, but the official forecasts are actually a lot more modest. The NBU believes that the economy of Ukraine will grow steadily, at 3.5%-4% year-on-year in 2019-2021.
The international financial institutions (IFIs) also expect modest growth in 2020. The country’s GDP growth will accelerate slightly to 3.5% y/y in 2020, according to the European Bank for Reconstruction and Development’s (EBRD's) Regional Economic Prospects report published on November 6. Likewise the World Bank is predicting 3.7% growth in 2020 and 4.25 in 2021.
● Debt
Ukraine’s state and state-guaranteed debt of Ukraine fell last year to 52% of GDP​, from 63% at the start of the year, reports the Finance Ministry. The Ministry’s goal is 45% at the end of this year, and 40% at the end of 2024. During 2019, the debt actually grew by 6%, from $78bn to $83bn. But Ukraine’s economy grew by about 3.5%. The hryvnia’s 15% appreciation against the dollar, also served to increase the dollar equivalent figure for Ukraine’s hryvnia economy.
● External sector
Ukraine’s trade has been growing as it tries to reorientate after Russia imposed sanctions on Ukrainian imports and trade relations more or less collapsed in 2014.
Exports to the EU have grown strongly but exports to the west still have a long way to go to replace the lost business with Russia.
As a result Ukraine has been running a trade deficit with both the EU and Russia of some $2bn in each direction. The resulting trade and current account deficits have been made worse by rising incomes that immediately pull in more imports.
However, the fiscal gap is not a problem thanks to the circa $14bn of remittances sent home by Ukrainian workers abroad that has financed the shortfall in the trade regime.
Agricultural exports in particular have been a boon, with Ukraine overtaking Russia in 2019 to become the world’s biggest grain exporter, earning $20bn from the business. And Ukraine is on track to repeat this performance in 2020.
The trade balance was badly hurt by falling metal prices on the international commodities market, which is one of Ukraine’s biggest export products. The outlook for metals prices in 2020 remains depressed thanks to lacklustre growth expected in the global economy in 2020.
The high point of Ukraine’s trade regime is the improving relations with the EU. Of 20 food-exporting nations, Ukraine recorded the fastest-growing food exports to the EU over the last year – up 38%. By comparison, the EU’s overall food imports increased by only 3%. As measured by the European Commission, in the year ending August, Ukraine sold €7bn of agricultural
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