Ukraine 2008-2009 outlook

[Vera]

Forecast
Jun 5th 2008
From the Economist Intelligence Unit
Source: Country Forecast

Outlook for 2008-09

The"Orange"administration of the president, Viktor Yushchenko, and the prime minister, Yuliya Tymoshenko, will be prone to internal divisions and will face a determined opposition.
The government's legislative capability will be limited by its slim parliamentary majority and internal differences. The lack of political consensus and the presidential election in 2010 will preclude swift structural reform.
Sharply rising inflation will present the main risk to macroeconomic stability in 2008. Although monetary policy will be tightened in response, fiscal policy is expected to be expansionary in 2008.
GDP growth is forecast to slow to an annual average of about 6.1% in 2008-09, reflecting the downside risks to the global growth outlook and significant uncertainty in the domestic economy, notably over surging inflation.
The current-account deficit is forecast to widen to an annual average of 5.7% of GDP in 2008-09, owing to rising import costs and strong import volume growth.

Monthly review

Ms Tymoshenko has said that she supports reducing the president's powers in favour of the legislature and has reportedly drawn up draft constitutional amendments to that effect.
The National Bank of Ukraine (NBU, the central bank) revalued the official exchange rate by 4% in May to tackle inflation, but has yet to set out a clear exchange-rate policy.
Ukraine has formally acceded to the World Trade Organisation (WTO).
The presidential administration has opposed the government's ambitious plans for accelerating large-scale privatisation in 2008.
Inflation hit 30% year on year in April 2008, as the impact of global energy and food price inflation has been exacerbated by the government's spending policies and the de facto peg if the hryvnya against the US dollar.
Real GDP growth picked up to 6.2% year on year in January-April 2008, from 4.9% in January, fuelled by rapid growth in private demand. The manufacturing sector has also picked up pace, but metals output remains sluggish.
The NBU's efforts to compress hryvnya liquidity have prompted many banks to reduce their consumer lending. However, foreign-owned banks have maintained strong lending.

[SteveH]

I do Worry for People in Ukraine who Borrow Money from ANY banks at the Interest rates 10% - 20%,
They are Living for Today and who cares about Tommorrow ,but i have seen this happen in the U.K. Over the past 10 Years,ok at a 5%  Rate,but Now it has come back to Haunt Them.
Cars are being Repossesed and as for Houses Repossesed and Sold off at a Cheaper rate,
Figures Released in August are Expected to Show about 45,000 in the past Year.

[Vera]

I do Worry for People in Ukraine who Borrow Money from ANY banks at the Interest rates 10% - 20%,
They are Living for Today and who cares about Tommorrow ,but i have seen this happen in the U.K. Over the past 10 Years,ok at a 5%  Rate,but Now it has come back to Haunt Them.
Cars are being Repossesed and as for Houses Repossesed and Sold off at a Cheaper rate,
Figures Released in August are Expected to Show about 45,000 in the past Year.

Exactly, the credit situation in Ukraine worries me a lot. In my opinion people borrow unwisely, buying practically all on credit. I think the credit availability is their while the majority is not educated on how to us credit and possible consequences. I see people buying stuff they totally do not need, the best example is mobile phones that cost like $300. What for? Is there really a need to own such phone? Or vacation on credit. The most stupid thing to do. At least if you buy your apartment you will build some equity in it. But vacation on credit- total foolishness and waste of money. Only go on that vacation if you have saved for it!!!! This rush for instant gratification does not promise anything good in the long run.

[rjm]

Absolutely and as Steve so correctly states, Ukraine should learn from Britain but I doubt they will.

As we speak people are buying vastly over priced apartments at interest rates that the rest of Europe is laughing at, surely it can only end in tears!

Lets hope Im wrong!

[SteveH]

Nato reviews Ukraine entry hopes 
 
Among some Ukrainians there is still deep hostility to Nato
A top Nato delegation has begun a two-day tour of Ukraine to discuss the next stages towards the country's possible membership of the alliance.

Nato Secretary-General Jaap de Hoop Scheffer is being accompanied on the trip by representatives of the 26 Nato member states.

But while Ukraine's government is keen to join the alliance, several hundred people mounted a protest in Kiev.

And Russia has warned Ukraine of severe consequences if it pushes ahead.

Last month Russian President Dmitry Medvedev said Ukraine would be in breach of a 1997 friendship treaty if it joined Nato.

Moscow is deeply opposed to its neighbours joining the alliance, and its relations with both Ukraine and Georgia have deteriorated sharply as they have made their membership ambitions clear.

At the weekend Russia said it could limit defence industry co-operation with Ukraine or increase visa restrictions.

Close to Russia

Mr De Hoop Scheffer met Ukraine's President Viktor Yushchenko on Monday.

The Nato delegation was also due to meet Ukraine's and defence and foreign ministers - who will be keen to explain their readiness to join, says the BBC's Gabriel Gatehouse in Ukraine.

They hope to be invited onto the alliance's Membership Action Plan, which officially kicks off the membership process.

But riot police stood outside the President Yushchenko's offices on Monday, where several hundred people held anti-Nato protests.

The Nato party is also likely to come face-to-face with such dissent as it holds public meetings in a number of cities across the country, our correspondent says.

Opinion polls consistently suggest that more than half of Ukrainians have a deeply negative view of Nato.

In eastern parts of Ukraine Russian is the most commonly spoken language, and much of the population there feels close links with Moscow.
 

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