Ukraine - Macroeconomic Update October 2011

SUMMARY POINTS

• (1) Real sector performance kept improving in September, underpinned by buoyant consumption and a rich agricultural harvest.
• (2) A more challenging external environment started weighing on export-oriented industries, which caused industrial production growth to decelerate to 6.4% yoy in September.
• (3) Due to a better than expected harvest, we are slightly upgrading the real GDP growth forecast to 4.5% yoy in 2011.
• (4) Consumer price inflation eased to 5.9% yoy in September. Despite an expected pick up through the rest of the year, year-end inflation should stay in single digits.
• (5) The state budget deficit stood at UAH 5.2 billion, or 15% of the full-year target, thanks to robust tax revenue growth. However, the broad fiscal deficit target of 3.5% of GDP may still be missed due to larger Naftogaz imbalances.
• (6) The IMF mission arrived in Kyiv on October 25th. Although it’s a positive sign, further cooperation with the IMF appears uncertain.
• (7) In September, the current account kept widening on faster growth of imports than exports. In addition, the financial account switched to a large deficit amid larger capital outflows from the banking system and a high population demand for foreign currency.
• (8) A worsened Balance of Payments is exerting depreciation pressure on the Hryvnia. But due to sizable NBU interventions on the forex market, the Hryvnia exchange rate with respect to the US Dollar remained virtually stable.

The report you will find here: Ukraine-Macroeconomic situation – October 2011

Other sources on economy:

• June 21, 2011 - Ukraine - Economic Update (Worldbank)
  • Despite steady improvements in 2011, Ukraine’s recovery remains fragile.
  • Growth in 2011-13 is expected to remain between 4-5 percent with widening external deficits under current policy conditions.
  • Potential growth would be significantly higher if fiscal, structural and governance reforms are undertaken.