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Ukraine’s economy gradually recovering

April 28, 2010

With exports on the rise, Ukraine’s economy began to recover over February-March, according to Troika Dialog Ukraine, an investment consultancy. Output in the basic sectors of the economy rose 4.1% compared to the previous year as industry and agriculture recovered, say company analysts.

“Although inflation picked up to 11.5% in February, it slowed down again in March and April,” says Troika Dialog. “The balance of payments also improved in February, with the current account nearly neutral and the deficit on the financial account down to US $0.6bn, largely because of lower payments on external debts and a revived inflow of foreign direct investment (FDI).”

Company analysts note that the hryvnia exchange rate against the US dollar grew 0.8% in March, to 7.93. The National Bank of Ukraine has been intervening in the market on a regular basis, buying up surplus dollars. For the first time since October 2008, NBU reserves grew to US $25.0bn.

One of the IMF conditions is that the Budget deficit not be above 6% in 2010, Troika experts pointed out, adding that the Budget for this year still has not been adopted, while talks with the Fund are expected to continue for a few more weeks. The company statement notes that, “in Q1’10, the deficit was under control, but expenditures will have to be cut. This is one of the main conditions for getting financial support from international financial institutions.”

In conclusion, Troika analysts say that if the 2010 Budget is adopted in line with IMF requirements, the country should expect new tranches to come through by the end of May or in June.

In January–February 2010, Ukraine’s export commodities added up to US $6.396bn, while imports were US $7.526bn.

Tags: economy