Page 4 - UKRRptSept20
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1.0 Executive summary
Ukraine’s economy appeared to be picking up in July after being very hard hit by the multiple crises in 1H20.
Ukrainian industrial and agricultural output and retail turnover - the most important sectors of the economy - improved in July. Retail sales were also up 8.5% y/y versus a 1.4% uptick in June, which was likely due to the lockdown being eased.
But that does not mean the economy is recovering per se. A second wave of coronavirus had established itself by the end of August with daily infections rise to over 2,000 new cases a day. The government closed the borders again to foreign visitors and were preparing for a possible second lockdown.
In the meantime the economy is still trying to find its feet following the first lockdown. Industrial output contracted 4.2% y/y in July versus a 5.6% drop in June. This was driven by a smaller y/y decline in mining and quarrying (down 0.7% versus down 4.9%), with better dynamics in coal, oil and gas production. Manufacturing showed a similar performance in July, remaining down 6.6% y/y versus down 6.2% in June. The decline in agricultural output stabilized at 5.8% y/y versus 40.6% in June (because of a weaker harvest).
After a 6.7% y/y tumble in GDP in 1H20, analysts are hoping for a better third quarter, but a lot depends on how bad the new wave of coronavirus is.
However, the consensus is the Ukrainian economy will gradually recover throughout the rest of the year, though the recovery will dragged on through the remaining quarantine restrictions. All-in-all analysts expect a 5% contraction of GDP this year.
On the political front the Zelenskiy administration continues to back peddle. The enthusiasm for reforms has waned in parallel with Zelenskiy personal popularity and since he reshuffled the government in March he has been on his back foot and trying to reassert his personal authority over government with diminishing success.
While Zelenskiy remains by far the most popular politician his rival former President Petro Poroshenko is climbing slowly in the polls and now in second place behind the president – albeit trailing by more than 10pp. Zelenskiy replaced the General Prosecutor with a loyalist. He has kept on the controversial Arsen Avakov as Interior Minister, who is another loyalist. And most recently he has failed to defend Artem Sytnyk, the head of the National Anti-Corruption Bureau of Ukraine (NABU) who is under attack by the courts and is championing the fight against graft. At the same time oligarch Ihor Kolomoisky continues to be at liberty and operating unimpeded, despite having stolen $5.5bn from his former bank PrivatBank.
The one political success Zelenskiy can point to, and one of his main campaign promises, is a ceasefire he brokered with Russian President Vladimir Putin has been holding for several weeks and forces have been moved out of some regions.
4 UKRAINE Country Report September 2020 www.intellinews.com
