The resigning of Ukrainian Government and the Prime-minister M.Azarov on January 28, 2014 cannot be considered as a fall down of Ukrainian economy and social support control systems.
The Government now chaired by Mr. S.Arbuzov (former First Vice-prime-minister), which fulfill its role till new Government will be approved by the Parliament, keeps economic and social situation in the country under control. Recent Decree of the President of Ukraine V.Yanukovich has empowered Mr.S.Arbuzov with necessary authority to exercise effective control over Government to ensure its effective activity.
It will not be true to say that present political tension in Ukraine does not have its negative impact on the economy and life of Ukrainian citizens. It is obvious, if the political crisis will not be resolved, the economic recovering and economic growth acceleration of Ukrainian economy, which became visible in IVQ 2013, will be under serious pressure.
Recent data revealed by Ukrainian statistics state that GDP 2013 was the same as in 2012. However, IVQ GDP 2013 was 103.7% in comparison with the same period of 2012 in real terms. Ukraine General Balance of Payment in 2013 was positive – 2 billion USD (In 2012 it was negative – 4.2 billion USD). The net inflow of FDI in 2013 – 3.3 billion USD (80% to the real sector of economy).
According to the Treasury, the general and special funds of the state budget received 25.3 billion UAH (including own revenues of budgetary institutions and subventions from the local budget) in January 2014.
22.5 billion UAH was paid to the general fund budget, which is up 12.2%, or 2.5 billion UAH from January 2013. The special budget fund received 2.8 billion UAH in January of 2014.
Government analysts say that the general budget fund revenues grew even though the VAT refund was up in January 2014. In January 2014, the VAT refund was 5.2 billion UAH, which is up 14.9%, or 0.7 billion UAH YOY, and up 1.1 billion UAH from the plan for January 2014. In January 2014, the nominal growth of revenue in the general budget fund was 13.8% year-on-year.
Present time Ukrainian Government assigns the highest priority to protecting of socially vulnerable groups of Ukrainian citizens. The volume of social support to low-income people, multi-children families, disabled children and people disabled since their childhood has exceeded 3.4 billion Hryvnas (310 million Euros) in January2014. Poor and disabled citizens should not become hostages of political situation.
The recent downgrading of Ukrainian sovereign rating by S&P and Fitch, without any doubts reflects growing risk because of existing political crisis. It is absolutely obvious that prerequisite for normalization of the environment for National bonds on international financial is settlement of the political turmoil in the country. There are no economic reasons for Ukrainian currency devaluation. Following IMF recommendation Ukraine adjusts UAH exchange rates (+/-2%). The devaluation/appreciation against USD and EURO, which took place in the framework of flexible exchange rate policy during Fevruary, 2014, is to adjust only due to the pressure of political factors. The general devaluation will not have significant impact on inflation level, which will be below 10% in annual terms. National Bank of Ukraine also has taken additional temporary steps to strengthen national banking system and currency market. These steps include special instruments to ensure bank’s liquidity and also to provide more control and transparency of interbank transactions.
Since early October 2013, when the political situation in the country started to aggravate, and through the end of 2013, the population has continued to increase the balances on their hryvnia deposits. Their growth was 15.1 billion UAH. At the same time the foreign currency deposit balance fell by 3 billion UAH over the same period, from 186.6 billion UAH to 183.6 billion UAH. These data is a strong argument in terms of absence of negative expectations towards hryvnia from both business and population.
Ukrainian banking system has demonstrated sufficient stock of stability in present tough conditions. Majority of commercial banks are stable, and the National Bank of Ukraine (NBU) controls situation on loan-money market and expanded its presence on currency market doing necessary interventions. In its report S&P recognizes that NBU foreign currency reserves volume plus credit facility from Russia will ensure refinancing and servicing of foreign debt by Ukrainian Government in 2014-2015 without considerable growth of the debt level. (S&P analytics states that 52% of Ukrainian debt volume nominated in foreign currency. However, substantial part of the debt is represented by loans issues on subsidized and preferential conditions.).
In his interview to Ukrainian TV channel “Business” on January 31, 2014 Mr. V.Litvitsky, the Counselor to Governor of the National Bank of Ukraine mentioned that “Ukraine has fixed on optimal level its gold and currency reserves by the end of 2013… all payment to the foreign holders of the sovereign debt has been made in time and in full” (including 5.6 billion USD to IMF).
The state debt in December 2013 was 73 billion USD or about 40% of GDP, which is substantially less than in overwhelming majority of EU member states. As of S&P expert’s opinion, net Ukrainian debt by the end of 2014 will be about 38% of the GDP.
Ukraine confirms its commitments regarding export contracts to its partners oversee. In December 2013 export has grown 4.1% in comparison with preceding month. It is expected that Ukrainian export will grow in 2014 also mainly due to agricultural products supply abroad. The recent devaluation of national currency on will make Ukrainian goods more competitive on foreign markets and contribute into export growth.
Following a record harvest in 2013 Ukraine is committed to fulfilling its obligations to supply more than half of 63 million tons of grain collected on Ukrainian fields oversees, including Portugal.
Ukrainian Ministry of Agriculture has processed multimillion contracts to supply grain and other agricultural products to Bangladesh, China, Egypt, Saudi Arabia etc. Ukraine continues to be the leading supplier of grain in the world contributing a lot into fight against hanger in low-income countries in Africa and Asia. E.g. Ukraine is close to signing of large-scale contracts to supply basic food product to Angola early 2014.
In 2013 Ukraine’s grain export overseas was 6.4 billion USD (10.07% of the total goods exported or 1/3 of the Ukrainian export volume to the EU – about 16.9 billion USD).
The main consumers of Ukrainian grain in the EU were: Great Britain (rye), Czech Republic and Germany (barley), Spain and Portugal (maize).
The updated forecast made by the Ministry of Agriculture of Ukraine on January 14, 2013 states that Ukrainian producers will supply to foreign markets in 2013-2014 Marketing years 33 million tons of grain. Ukraine has already exported 4.6 million tons of grain in November and December 2013 setting a new national record.
Ukraine grain and agricultural products expand their presence on markets overseas, e.g. Ukrainian export of agricultural products to Chine quadrupled in 2013.
Ukraine has demonstrated to the EU that country is reliable partner in energy supply and gas transit, which go to Europe without any interruption and delay. It is especially important, taking into account severe weather impact on countries in Europe. Today Ukrainian Government works on modernization of the consequent part of Urengoi-Pomary-Uzhgorod pipeline, which is the major channel for Siberian gas supply to the EU member states. It will contribute into reliability of gas transit in the nearest future.
During recent visit of the President of Ukraine to China in December 2013 several agreements and memoranda have been signed. It will be resulted in significant inflow of FDI into Ukrainian economy (at least 8 billion USD in the near future to develop land transport infrastructure and seaports). Following President’s visit, in addition to several billions USD has been already committed by Chinese partners to Ukrainian agricultural sector support, China Eximbank opens a 3 billion USD credit facility for Ukrainian irrigation system upgrade. It will permit to reconstruct those systems on 1.4 hectares.
Ukraine continues its activity in advanced, high-tech sectors including space exploration. During the present year national airspace industry will assemble and contributes into six launches to deliver satellites into orbit by Ukrainian space launchers. The Memoranda between Ukrainian and Russian Space Agencies signed during Viktor Yanukovich visit to Moscow in January 2014, stipulates large scale cooperation in space research and exploration, including implementation of “Sea Launch”, Land Launch” and “The Dnieper” projects. All these projects use launchers designed and assembled in Ukraine.
Ukraine and Russia has also agreed to support on the state level the renewal Antonov 124 heavy-lift aircraft production. This aircraft, designed in Ukraine use, equipped with Ukrainian high performance jet-engines. Both sides have also identified cooperation priorities in ship building, which permit to restart full range construction of different ship ranging from fishery boats to giant aircraft carriers.
In general, Ukraine will receive investments and long term orders worth several tenths billion USD, which contribute into national sustainable social and economic growth. Moreover, substantial part of investments will come to high-tech segment of Ukrainian industry, which mainly located in Eastern and Southern parts of Ukraine, permitting to high utilization level and further development of existing industrial capacities and human capital.
One should emphasize that temporary destabilization does not undermine Ukrainian capacity to fulfill its international financial and economic obligations; Ukrainian economy works in stable way. Demands of some opposition politicians to start general strike went nowhere. Nor business neither both working people and trade unions responded in positive way on such destructive “proposals”.
 1EURO=11.66UAH 11.02.2014 Data (See www.nbu.gov.ua).