Page 20 - UKRRptNov19

average exchange rate in 2020 is projected at UAH27.00/$under the conservative scenario and UAH24.80/$under the optimistic one.
The National Bank of Ukraine (NBU) believes that the economy of Ukraine will grow steadily, at 3.5%–4% year-on-year, in 2019–2021, the regulator said in a statement on October 23. Compared to the July macroeconomic forecast, the NBU has revised its economic growth forecast upwards, to 3.5% y/y in 2019 and 2020 and 4% y/y in 2021.
On September 27, the International Monetary Fund (IMF) said in a statement that Ukraine’s economic growth is too low to noticeably close the income gap with Ukraine’s neighbours.
"Per capita GDP (in PPP terms) in Ukraine is still very low - just 20% of the EU average, the second lowest level of all Central and Eastern European countries," the statement reads. "Growth is held back by a weak business environment - with shortcomings in the legal framework, pervasive corruption, and large parts of the economy dominated by inefficient state-owned enterprises or by oligarchs - deterring competition and investment."
A regional comparison shows that the most significant differences in reform progress between Ukraine and its neighbours are in the quality of the legal institutional framework. While there has been progress in setting up new institutions to fight corruption, tangible results have yet to be achieved. Because of the poor business environment, investment, and notably foreign direct investment, has been much lower in Ukraine than in other countries in the region, the IMF added.
"This lack of investment has limited productivity growth (labour productivity amounts to less than 10% of average productivity in EU countries), private sector job creation, and improvements in living standards, despite Ukraine’s well-skilled labour force. As a result, many workers seek job opportunities abroad."
Higher, sustainable and inclusive growth is needed for incomes in Ukraine to catch up to the levels seen in neighbouring countries, the IMF believes. "This will depend crucially on the implementation of ambitious reforms to support Ukraine’s transition to a full-fledged market economy. This is not an easy task and it has been a challenge in the past, when stop-and-go policies resulted in the repeated build-up of large imbalances and economic crises.
4.0 Real Economy 4.1 Industrial production
Ukraine's industrial output fell 1.1% y/y in September after dropping 1.7% y/y in August, the State Statistics Service reported on Oct. 24. Seasonally adjusted output declined 0.1% m/m. In 9M19, industrial output didn’t change on a year-on-year basis.
Manufacturing output shrunk 1.2% y/y in September (after a 4.1% y/y decline in August). In particular, the decline in metallurgy deepened to 5.4% y/y (from a 3.2% y/y slide in August). Machinery production shrank 3.6% y/y (vs. 4.7% y/y in August). Meanwhile, food production increased 1.6% y/y (vs. a 3.2% y/y
20 UKRAINE Country Report November 2019 www.intellinews.com