Ukraine Finance Minister expects 1.7% GDP growth in 2015

Макроэкономика 22.04.2014 The Minister of Finance, Alexander Shlapak announced government estimates of key macro indicators for 2015, on April 18. In particular, the Cabinet anticipates an economic recovery with 1.7% GDP growth in 2015 (vs. government’s 2014 estimate of -3.0%). Inflation is projected to slow to 5.4% YTD in 2015 from 12% YTD, as projected for this year. Fiscal deficit should be near 3% of the GDP and the general public debt should not exceed 55% of GDP. Alexander Paraschiy: We share the optimism of the Finance Minister.What’s more, we anticipate the economy to improve even faster with +2.3% yoy GDP in 2015. A gradual revival of world trade, as well as hryvnia devaluation are the key reasons standing behind our optimism. Unlike in 2008-2009, when the economy fell five quarters in a row during the global crisis; the problems Ukraine is facing now are only regional and the main negative tendencies stem from Russia’s unfriendly actions. To put it differently, in this context hryvnia devaluation will make Ukrainian exports more competitive on non-Russian markets on the back of the world trade revival thus triggering an inevitable export growth to those markets. No doubt, narrowing access to Russian markets as well as frozen budget spending will make the economy fall in 2014. However, from 2015 we see positive dynamics returning as Russia is unlikely to ban Ukrainian exports permanently. It is clear that the improvement of the economy is possible only under the assumption that there is no military conflict in the near future.