Page 5 - UKRRptFeb19

1.0 Executive summary
Ukraine will continue its recovery in 2019, but growth will be weak, the International Monetary Fund (IMF) said on January 8, according to a report of the IMF published along with the text of the request for Stand-By Arrangement (SBA) and cancellation of arrangement under the Extended Fund Facility (EFF) of the Ukrainian government, reports the Kyiv Post .
“Investment, particularly foreign direct investment, is held back by a difficult business environment, while large numbers of worker seek job opportunities abroad as economic growth is too low for incomes to noticeably close the gap with regional peers,” the IMF said in the report, as cited by the Kyiv Post.
The Ukrainian economy collapsed in 2015 with a 15% contraction in that year. The economy returned to growth in 2016 but it has been unable to gather any momentum thanks to a combination of domestic foot dragging on the reform agenda by the President Petro Poroshenko administration and the destabilisation caused by a war with Russia in the eastern region of Donbas.
According to the median forecast of analysts polled by Reuters , Ukraine’s gross domestic product will grow 2.9% this year compared with 3.2% expected for 2018 and 2.5% in 2017.
Efforts to create a more dynamic, open, and competitive economy have fallen short of expectations, and the economy still faces important challenges, the IMF said.
On the upside, according to the State Statistics Service, in the third quarter of last year, real gross domestic product (GDP) in annual terms showed growth for the eleventh quarter in a row, while slowing to 2.8% after accelerating for two consecutive quarters – up to 3.1% in 1Q and up to 3.8% in 2Q 2018.
The rise of industrial output in January-November last year compared to the same period of 2017 was only 1.6%, while in November, a 0.9% drop was reported.
The deficit of foreign trade in goods and services, according to the National Bank, for January-October 2018 exceeded $10bn, which is 1.5 times higher year-on-year.
Agricultural output for eleven months, due to favorable weather conditions and enhanced efficiency of agribusinesses, was up 8.2%. Last year, Ukrainian farmers harvested a record 70mn tonnes of grains, which is 4mn tonnes higher than the previous maximum.
The income of Ukrainians has also been growing – the average salary in October rose by almost 25% compared with the previous year. This contributed to the retail trade turnover in January-November growing 6.2% in annual terms.
On the downside inflation has been persistently high and ended 2018 at 10%. The National Bank of Ukraine (NBU) was forced to hike interest rates three times in 2018 ended at a crushing 18%, which in tern has stymied growth. The analysts polled by Reuters say they see inflation slowing to 8.5% in 2019 from 10.2% expected at the end of 2018 and 13.7% in 2017.
The current account deficit has also been consistently high, although it was alleviated in the last months of the year thanks to a bumper grain harvest that
5 UKRAINE Country Report February 2019 www.intellinews.com