Ukraine overview

Cityscape in Ukraine

In September 2018 the EBRD Board of Directors has approved a new strategy for Ukraine which sets out the Bank’s priorities in the country for the next five years.

The EBRD will pay special attention to projects that will integrate investment and policy engagement in areas such as privatisation, energy security and efficiency, the financial sector, trade and infrastructure.

The EBRD’s operational and strategic priorities in Ukraine will rest on the following five pillars:

  • Promoting privatisation and commercialisation in the public sector to increase competitiveness and good governance: The EBRD will help stimulate private sector participation across sectors and further commercialisation of public sector firms. The Bank will continue to support the implementation of modern public sector procurement as well as the introduction of proper public governance.
     
  • Promoting the rule of law, fair competition in the private sector and support of companies that use best practice: The EBRD will foster competition and support anti-corruption efforts. Special attention will be paid to improved skills and to the employability of disadvantaged groups.
     
  • Strengthening energy security through effective regulation, market liberalisation, diversified and increased production and energy efficiency:  The EBRD will pledge more resources to create a market structure for sustainable energy and improved energy connectivity. The Bank will assist in the creation of increased resource efficiency and will help promote renewable energy.
     
  • Enhancing the resilience of the financial system by strengthening Ukraine’s banking sector, and by developing capital markets and non-bank finance: The EBRD will promote a stable and efficient banking sector, a greater variety of non-banking financial channels and the use thereof.
     
  • Improving integration by facilitating trade and investment, expanding infrastructure links, and supporting convergence with EU standards: The Bank will invest in improvements to connectivity through better infrastructure. It will also help facilitate increased trade and investment flows.

The EBRD’s latest Ukraine strategy was adopted on 3 October 2018

Current GDP forecast for Ukraine’s Real GDP growth in 2018 3.5%

Current GDP forecast for Ukraine’s Real GDP growth in 2019 3.0%

Growth of the Ukrainian economy has gained some momentum in 2018 but remains modest. Economic output growth accelerated from an average of 2.5 per cent in 2018-19 to an estimated 3.5 per cent year-on-year in the first half of 2018. Fast-growing real wages and remittances have stimulated household consumption. Real wages grew by 12.8 per cent year-on-year in the first eight months of 2018 while remittances in US dollar terms increased by 31.5 per cent year-on-year in the first six months of the year. Gross fixed capital formation continued to grow apace in the first two quarters of 2018, albeit at a slower rate compared to the same period of the previous year. In the first half of 2018, exports of goods and services contracted in real volume terms but growth in the US dollar value of export receipts was positive due to favourable terms of trade. Headline inflation remained elevated at 11.4 per cent year-on-year in the first nine months of 2018, well above the medium-term inflation target of 5 per cent plus-minus one percentage point, although the rate of inflation slid into high single digits between June and September. To counter the inflationary pressures, the National Bank of Ukraine raised its key policy rate four consecutive times from 14.5 per cent in January 2017 to 18 per cent in September 2018. Exchange rate volatility has remained under control in the year to date, despite seasonal variations. Since April 2018 international reserves have been on a declining path, falling from US$ 18.4 billion to US$ 16.6 billion (covering approx. 2.9 months of imports) as of September 2018, although this trend is expected to be reversed upon renewal of cooperation with the IMF. In October 2018, the authorities and the IMF reached a staff level agreement on a new 14-month Stand-By Arrangement for US$ 3.9 billion. If approved by the IMF Executive Board and duly implemented, this programme will help to address Ukraine’s near-term external financing needs and to maintain macroeconomic stability throughout the electoral cycle next year. We forecast the Ukrainian economy to grow by 3.5 per cent in 2018 and by 3.0 per cent in 2019. Large foreign exchange public debt liabilities falling due in 2018-19 pose downside risks to the outlook.

Ukraine in the EBRD’s 2018-19 Transition Report