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09 January 2014

Ukraine's economy in 2014 is expected to grow by 1-1.5% after a year of recession


Economic indicators of Ukraine were not affected by the December political crisis. This is evidenced by the published forecasts of the international rating agencies Standard & Poors and Moody's, as well as the International Monetary Fund.

Late last year, Standard & Poor's raised its forecast for the credit rating of Ukraine in national and foreign currency from "negative" to "stable". The agency's analysts believe that the Russian loan of $ 15 billion next year will definitely help Ukraine in achieving its foreign economic goals.

Based on long-term intelligence Moody's Investors Service agency expects 2014 growth in gross domestic product (GDP) of Ukraine by 1.5% (after a year of decline by 1%). IMF and Standard & Poor's have more moderate estimate to Ukrainian economy: in their view, Ukraine's GDP in 2014 would increase by 1% after the current recession by 0.3%-1%. And, that is quite natural, the Cabinet of Ministers of Ukraine is much more optimistic about the prospects for the country's economy: 2014 draft budget is based on a forecast of 3% GDP growth.

Ukrainian and international analysts have noted improvements in the banking sector.Reducing interest rates favors the influx of capital into the economy. During 11 months of 2013 the weighted average rate on loans to legal entities decreased to 14.5% in UAH and 8.6% in foreign currency - compared to 20.2% and 9.5% at the beginning of the year, the rating agency Rurik claims.

The German economist Dorothea Schaefer, professor of the German Institute for Economic Research DIW, notes that the banking system of Ukraine got its benefits fromreducing the dollarization of loans by 3.1% and hryvnia deposits positive growth. Ukrainian banks have become less vulnerable to the potential risks of a currency crisis. In addition, it shows the growth of public confidence in the Ukrainian banking system, Ms. Schaefer said.

The structure of Ukrainian exports on the basis of 2013 remained stable, despite the negative external and internal factors, noted in the Ministry of Economic Development and Trade of Ukraine. The share of EU countries in exports for the year grew by 2 percentage points (to 26.6 %) , the share of CIS countries decreased by 1 percentage point (to 35.9 %), Ministry said. Top-10 countries to buy Ukrainian goods today are Russia (24.7%), Turkey (6.1%), China (4.4%), Poland (3.9%), Kazakhstan (3.7 %), Italy (3.7%), Egypt (3.5%), Belarus (3.3%), India (3.1%) and Germany (2.6%).

In January-November 2013 the net inflow of direct investment in Ukraine amounted $ 2.7 billion.

Agricultural sector provides about 25% of foreign exchange earnings from Ukrainian exports, in particular, exports of grains and oilseeds, the Minister of Agrarian Policy and Food Mykola Prysyazhnyuk said. The main export destinations AIC of Ukraine are countries of Asia, the Middle East in particular, as well as the European Union and the CIS countries. Fall 2013 opened new large market China to Ukrainian farmers.

Reduction of gas prices should stimulate the development of the chemical industry,with growth by 10%. Growth by 5% is achieved in mechanical engineering. This is due to the promises of the Russian authorities to increase the purchase of railway equipment, Ukrainian analysts claim.

The authorities stress that the December agreement with the Russian Federation in any case does not mean the rejection of European integration policy of Ukraine. Ukrainian Foreign Minister Leonid Kozhara recalls that the European integration course  "is the point of the official policy of the Government  and is required by law."

Prime Minister Mykola Azarov, who in late November announced the suspension of the EU Association, said: "Ukraine continues to develop good-neighborly and mutually beneficial relations with the CIS countries and the European Union, defending its national interests. We have received reliable levers to stabilize the financial and economic situation in the country, continue to modernize our economy and, finally, got a strong position to create a free trade zone with the European Union, while developing a free trade zone with the CIS ."
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