Ukraine overview

Cityscape in Ukraine

Since early 2014, as a response to the crisis that engulfed Ukraine in late 2013, the EBRD has been providing a comprehensive support package that assists the stabilisation and anchoring of reforms to the maximum extent possible under the strategic framework of its ‘Reform Anchoring & Crisis Response Package’.

The package’s three priorities are: 1) banking sector stabilisation and restructuring; 2) energy security and energy sector reforms; 3) financing of key private corporate players.

More broadly, and on the basis of the EBRD’s 2011 strategy for Ukraine, the Bank works in the following areas:

Energy: the EBRD supports electricity transmission networks, operations that integrate Ukraine into the European energy market and operations that increase overall energy efficiency and decrease the sector’s carbon intensity. We will also support the modernisation of Ukraine’s gas transportation and distribution system, provided the authorities pursue a comprehensive and credible reform agenda, including restructuring NAK Naftogaz.

Enterprises: the EBRD supports FDI and local enterprises to help diversify the economy and restructure old energy-intensive industries with a focus on improving governance, transparency and energy efficiency.

In recognition of Ukraine’s great potential as an agricultural producer, the EBRD supports investments along the whole value chain and especially the instruments that support primary producers.

The EBRD assists Ukraine in the development of knowledge intensive industries and effective use of its human and scientific potential and also supports the government’s privatisation programme of remaining state enterprises, promoting the transparency of the process in order to maximise value for the public sector.

Infrastructure: In the road sector, the EBRD supports the completion of the modernisation of the main transport corridor connecting Ukraine to the European Union. We are re-engaging with Ukraine’s railway sector following the government’s decision to resume sector reforms by completing corporatisation of the national rail operator Ukrzaliznytsia and creating conditions for private sector operations and investment.

The EBRD also supports the commercialisation of municipal utilities through projects with large demonstration effects or energy efficiency gains.

Financial Sector and Capital Markets: our main priorities include providing the banking sector with targeted long-term loan and equity funding together with technical assistance to help support activities that help to strengthen the sector’s future stability.

The lending instruments focus on micro, small and medium-sized enterprises, financing energy efficiency improvements and trade facilitation with the use of appropriate technical assistance. In cooperation with other IFIs, the EBRD will help the authorities strengthen the role of private capital in the banking sector. We will work with other IFIs and the National Bank of Ukraine to address remaining issues preventing the EBRD from structuring loans in local currency.

The EBRD is also providing support to institutions under the Reform Support Architecture for Ukraine:

The recent period of political instability has had a profound impact on progress in reform implementation and public administration reform.  In this context, the EBRD, together with the EU and other international partners, has adjusted its policy support to match arising needs and reform progress on the ground. We have been engaging intensively with key Ukrainian decision-makers in a dialogue to rebuild momentum, re-focus critical reform priorities and build a sustainable reform approach.

As a result of this engagement, the Ukrainian Prime Minister and President have agreed to a new, more coherent and efficient, reform support architecture.

The EBRD is supporting reform teams whose activities range from conceptualising reform processes to assisting in their implementation. The Bank is providing support for:

  • The development and coordination of national reform priorities, through the support of the National Reforms Council’s (NRC) Project Management Office, the technical implementation body of the NRC.
  • The establishment of Reform Support Teams (RSTs), in selected priority ministries, which will be tasked with the implementation of priority reforms undertaken by these ministries, and the transformation of public administration within these ministries.
  • The establishment of a high-level international Strategic Advisory Group for Support of Ukrainian Reforms (SAGSUR), providing expert advice to the Prime Minister and President on how to deliver reforms efficiently and effectively.

As well as being a country where the EBRD works, Ukraine is also an EBRD donor. Ukraine is both a contributor and a beneficiary of the Eastern Europe Energy Efficiency and Environment Partnership (E5P) Fund. In 2015 Ukraine paid a €2 million instalment, raising its overall stake in E5P to €10 million.

The EBRD’s latest Ukraine strategy was adopted on 13 April 2011

Current GDP forecast for Ukraine’s Real GDP growth in 2017 2.0%

Current GDP forecast for Ukraine’s Real GDP growth in 2018 3.0%

Ukraine’s economy stabilized in 2016 and embarked on a moderately-paced recovery. GDP grew by 2.3 per cent for the year as a whole, driven by a rebound in domestic demand from the low base of the previous two years. In 2016, household consumption grew by 1.8 per cent in real terms. Investment in fixed assets, which increased by approximately 20 per cent in real terms in 2016, was funded mostly from enterprises’ own earnings while FDI, bank lending and public infrastructure spending remained weak. Commodities still account for a significant share of Ukraine’s exports, exposing the economy to volatility in commodity markets. In 2016, export of goods and services declined by 1.6 per cent in real volume terms. In the first quarter of 2017, Ukraine’s industrial production contracted by 0.7 per cent year-on-year, affected by the cargo transportation blockade of the area that is currently beyond the control of the Government of Ukraine. The blockade will weigh down on GDP growth and balance of payments in the near term.

Consumer price inflation picked up from an average of 13.9 per cent year-on-year in 2016 to 15.1 per cent year-on-year in March 2017. The National Bank of Ukraine expects to bring it down to single digits by the end of 2017. The current account deficit widened from almost zero in 2015 to 4.1 per cent of GDP in 2016, reflecting the recovery of domestic demand and weak exports. PrivatBank, the largest bank in Ukraine, was declared insolvent and nationalized in December 2016 without major disruptions to the broader economy. The hryvnia exchange rate remained predominantly stable in the wake of the nationalization. The combined general government and Naftogaz deficit stood at an estimated 2.3 per cent of GDP in 2016, below the initially planned deficit target of 3.7 per cent of GDP. In 2017, it is planned to widen somewhat to 3.0 per cent of GDP. We forecast the Ukrainian economy to grow by 2.0 per cent in 2017 and 3.0 per cent in 2018.

Ukraine in the EBRD’s 2015-16 Transition Report