Prime Minister Denis Shmyhal promised the decade of the “economic breakthrough”, the national Bank increased its international reserves to an eight-year high, and inflation has returned to growth – these are the main economic news this week.
The second week of July was less intensive economic developments in contrast to the first. However, it also brought a lot important for the business life of the country news. So, during a virtual round table, Prime Minister Denis Shmyhal said that Ukraine has all the necessary resources to 2020-ies was a decade of economic breakthrough. According to him, the Cabinet of Ministers has a vision and desire to make it a reality.
“Now, many economists, sociologists, journalists started talking about the fact that the 2020-s can be a lost decade in terms of economic development. But I’m sure if we work together and hard work, we can avoid such scenarios by far. Ukraine just has all the necessary resources. Our government has the vision and desire to make this decade was a decade of economic breakthrough”, – said Smigel.
In confirmation of his words, the head of government noted that Ukraine entered the current coronaries much more powerful than the crisis in 2008: as of 1 July foreign exchange reserves amounted to 25.4 billion dollars, the banking system’s liquidity exceeded 200 billion hryvnia, and the Single Treasury account is 135 billion.
Meanwhile, despite the optimism of officials, Ukraine continues to be in recession: according to Ministry of economy, gross domestic product in January-may 2020 declined by 5.9 percent. It is obvious that economic recovery to pre-crisis indicators will occupy not one year and achieve an “economic breakthrough” will be very, very difficult.
Also this week, President Vladimir Zelensky visited the Volyn oblast, where in the framework of the working visit, he met with local entrepreneurs. The head of state once again called for the simplification of procedures for obtaining business loans and announced the emergence in Ukraine “portfolio lending”.
In addition, the guarantor has expressed confidence that, despite coronaries, mortgage rates in Ukraine will decrease to ten percent per annum until the end of the year. According to him, this will be an incentive for Ukrainians to emigrate to other countries in search of a better life.
Zelensky also not left without attention one of the main priorities of the authorities – the construction of roads that in recent years allocated a record budget deficit. Understanding the importance of investments in the road sector, which is one of the drivers of national economic development, resident announced plans next year to build, at least twice more expensive than this year.
Moreover, knowing the poor state of many sections of the route in the regions, the President called for the transfer of all local roads to the balance of “Ukravtodor”.
Record growth in reserves
This week, the national Bank reported an increase in international reserves in June. This indicator reached the highest value over the past eight years – an increase of 12.4% to 28.5 billion dollars.
This was achieved due to the receipt of the first tranche under a new cooperation program with the International monetary Fund and the associated funding, and by increasing purchases of foreign currency by the national Bank on the interbank market. In particular, Ukraine has received almost $ 2.1 billion from the IMF and 500 million euros from the European Union.
In addition, the growth of reserves contributed to the placement of internal government bonds denominated in foreign currency to 353,3 million Euro.
Also on the dynamics of the reserves was affected by the operations of the national Bank on the interbank currency market. Due to the fact that the supply of currency from the business continued to exceed demand, the NBU replenished reserves in the amount of approximately $ 1.2 billion through the redemption currency on the interbank market.
The NBU said that the current volume of the international reserves cover 4.8 months of future imports, which is sufficient for fulfillment of Ukraine’s obligations and current operations of the government and the Central Bank.
The acceleration of inflation
The state statistics service this week released data on inflation, according to which consumer price inflation in June in annual terms was 2.4%, accelerating from 1.7 percent in may. Overall, since the beginning of 2020, consumer prices rose 2 percent.
According to the state statistics service, the largest price increase in June in annual terms recorded on fruit – 23.8%, alcoholic beverages and tobacco products – 11.8%, bread and bakery products – 9%, milk – by 6.5%.
Most in June prices fell for natural gas (40.4 percent), water supply (23%), fuels and lubricants (15.7%), vegetables (15.9 percent), eggs (10.4 percent).
If to analyze the dynamics of market prices in June compared to may this year, increased prices for fruit (8.4 percent), poultry meat, butter, bread, sunflower oil, beef, sour cream (2,3-0.4%). At the same time, cheaper vegetables (4.7%), milk, sugar, rice, lard, pork (1,3-0.9 percent).
It is worth noting that the current rate of inflation close to the forecasts of the National Bank, which is also previously stated about the expectations that in the coming months, price growth will moderately accelerate in March due to the weakening of the hryvnia. However, in the future inflation will be limited by falling consumer demand and a continuing low energy prices. This will create the space for rate cuts to maintain economic recovery.
The Cabinet of Ministers on Wednesday has traditionally held a meeting, during which made several personnel appointments. In particular, the government appointed the Roman Shakhmatenko Deputy Minister of environment protection and natural resources Igor Orlenko – Deputy head of State fiscal service, Natalia Ex – Deputy head of the State tax service. In addition, the Cabinet has sacked the head of the State service of special communication and information protection of Petrov Valentin and appointed in his place Yuri Sigala. Also, the government has appointed Valentin Dressing the head of the State Agency of water resources.
In addition to staffing issues, the Cabinet has allocated nearly 1.7 billion UAH of subventions from the state budget to local budgets for the socio-economic development of regions. According to the Prime Minister, these funds will be focused on the needs of the Ukrainians that they “felt change of everyday life.”
Another important government decision was to extend until 2030 the strategy of revival of domestic aircraft building, she was approved for the period until 2022.
As noted by the Minister of economic development, trade and agriculture Igor Petrashko, the strategy envisages the development of a new transport aircraft, helicopters and drones, as well as certification of aircraft equipment according to the norms of the European Agency of aviation security.
Also provides for the completion of unfinished aircraft An-140, An-74, An-32P at the Kharkov aviation production enterprise, modernization and production of helicopters Mi-2 MSB and Mi-8 SMEs.
Next week promises to be no less intense events. The key can be appointment of new heads of the national Bank and Antimonopoly Committee, as the Parliament must have time to do it before you go on vacation, that is, until July 17. Otherwise, according to the number of members of such personnel matters may be the subject of an extraordinary meeting of Parliament.
More next week, considering the forecast of weather forecasters, will bring some cold, and in some regions the rains. Farmers will continue harvesting of early grain, although because of the cold and rainy spring the pace this year is far behind last year.