Big Economy – 2016

Ukrainians have really felt in the last couple of years what an economic decline is, a decline in production; the number of unemployed continues to grow, the level and duration of life are decreasing.

But the Cabinet of Ministers’ forecasts for the next three years for Ukraine are quite optimistic. The ministerial plan for social and economic development of the country is designed for the next three years – from 2017 to 2019. The government provided two scenarios for economic development in this period – optimistic and pessimistic – however, they differ insignificantly from each other. Both options provide for GDP growth and average wage growth, with wages almost doubling the pace of inflation growth. Price growth will slow down and even under the pessimistic scenario will not exceed 27% over three years.

Ukraine has lost a lot of production, enterprises are regularly closing in various industries. For example: in foundry production alone, our country has lost more than a thousand enterprises in the last two years. Today, legislation does not protect the rights of farmers, and they have to strike to achieve the opportunity to develop agricultural business in our country. Ukraine still has a lot to go through to restore its economy, restore production and pay off both its internal and external debts.

Recovery

The International Monetary Fund’s program documents on Ukraine indicate recovery of the Ukrainian economy. At the end of 2016, the IMF expects growth of the Ukrainian economy by one and a half percent. “Although the 2015 recession was more severe than originally expected, the economy is now recovering,” the IMF notes. According to the report, in the first half of 2015, the decline in Ukraine was almost 16 percent. At the end of 2016, growth of 1.5 percent is expected. The IMF expects inflation in Ukraine “should accelerate slightly by the end of 2016 – to about 13% – due to increases in gas and heat tariffs.”

Despite positive IMF assessments, “risks to the forecast remain large” due to “political instability, including the possibility of early elections, policy changes and slow implementation of the (anti-crisis) program.”

Meanwhile, the international rating agency Fitch Ratings maintained the forecast for Ukraine’s economic growth in 2017 at 2.5% and the growth forecast for the current year at 1.1%.

Investment Attractiveness

Foreign investors continue to invest their millions in the Ukrainian economy. In just the first nine months of the current year, $3.8 billion of new investments came into the Ukrainian economy. The volume of these investments amounted to $45.152 billion, which is $2.618 billion more than at the beginning of the year, reports Gosstat. Investments came from 125 countries, but the main investors (83.1% of the total) are Cyprus, the Netherlands, Germany, Russia, Austria, Great Britain, British Virgin Islands, France, Switzerland and Italy.

As for investments from Ukraine, they went to 47 countries of the world, with 93.4% going to Cyprus.

State Enterprises

In Ukraine, the losses of the largest state companies were calculated. Today, 3,458 thousand state enterprises are state-owned, of which only 1,801 thousand are operating.

In 2015, the total loss of the TOP-100 state companies decreased from UAH 117 billion to 53.2 billion, reports the press service of the Ministry of Economic Development and Trade. These 100 state companies account for 75% of net income and 86% of state assets. The largest assets are concentrated in the oil and gas sector (NAK “Naftogaz of Ukraine”), transport (PJSC “Ukrzaliznytsia”) and electricity (SE “Energoatom”).

Formally, state enterprises are owned by various government agencies – ministries, the state property fund. In fact, the ultimate beneficiaries are you and I – the Ukrainian people. But the people are far from always able to ensure the realization of their ownership rights as shareholders of an ordinary company can.

Inflation Slowed

According to experts, in November inflation slowed due to falling vegetable prices to 12.1% compared to 12.4% at the end of the previous month.

In November 2016, consumer inflation was 1.8%, in annual terms it slowed to 12.1% compared to 12.4% in October. This is evidenced by data from the State Statistics Service.

“Such dynamics of annual inflation was expected and corresponded to our forecast,” they say at the National Bank. “Annual inflation slowed due to a decrease in raw food inflation, which turned out to be more significant than we forecast. Nevertheless, the growth of administratively regulated prices and tariffs, as well as core inflation, turned out to be somewhat higher than forecast,” explained the NBU.

Growth in prices for raw food products slowed to 1.4% in annual terms, primarily due to high supply of vegetables and fruits, explains the NBU. In particular, vegetables fell in price by 30.2%, and fruits by 3.7% in annual terms. Nevertheless, prices for milk and dairy products continued to rise, which was facilitated by increased demand from processors.

Partners of the “Big Economy – 2016” Project

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