The government approved the macroeconomic forecast for the next three years, national Bank has worsened the economic situation this year, the hryvnia has stabilized, and rates for electric energy went into growth are the main economic news this week.
On leaving the last week of July, the government approved updated forecasted indicators of economic and social development of Ukraine for the next three years. According to the Prime Minister of Denis Smagala, updated macroeconomic forecast envisages the country’s return to economic growth next year, with a forecast rate of increase in GDP by 4.6 percent. The minimum wage in 2021 will grow first to 6,250 hryvnia, and by the end of the year to 6500 UAH. In 2022, the minimum wage will be UAH 6700, and in 2023 – 7200 UAH.
Updated macroeconomic forecast confirmed the assessment of the fall of the gross domestic product of Ukraine in 2020 at the level of 4.8 percent.
“Our baseline forecast remains unchanged for Ukraine. This is a reduction in GDP by 4.8% in 2020. We see that Ukraine is moving according to the scenario developed by the Ministry of economy. The Ministry of economy and the Ministry of Finance is yet to confirm the move in that scenario,” – said the head of government.
The Prime Minister also noted that to achieve growth you need to focus on supporting small and medium business, the development of industry, supporting domestic producers, domestic investments, improving the business climate.
Minister of Finance, Sergei Marchenko predicted that the recovery of the Ukrainian economy will begin by the end of this year, with the recovery dynamics in the following.
“In the fourth quarter of this year, we expect a gradual economic recovery. In 2021 it is expected the revival of economic dynamics. It will be a budget growth of welfare of citizens and the economy”, – said the Minister.
As for the hryvnia, according to the updated macroeconomic forecast, the national currency for 2021 revised at the level of 29.1 hryvnia to the dollar.
The economic crisis
Meanwhile, the economic crisis in Ukraine continues. This week the national Bank has estimated a decline in GDP in the second quarter of 2020 at the level of 11 percent in annual terms.
The main factors of the deterioration of the economy was the strict quarantine restrictions of certain types of activities, as well as the decrease of production in agriculture due to the later start of harvesting of early grain crops.
As reported by the national Bank forecast Ukraine’s GDP in 2020 revised to fall to 6 percent because of the preservation of the lowered demand in the country for quarantine.
“The GDP forecast for 2020, revised to a significant decline of about 6 percent. The preservation of adaptive quarantine in some areas and still depressed domestic demand will constrain economic recovery. Slow recovery from the crisis, other countries will reduce the opportunities for the rapid recovery of exports,” – said in the report of the NBU.
The national Bank also informed that public and publicly guaranteed debt in 2020 will increase to 62 percent of GDP because of the increasing budget deficit, falling nominal GDP, and weaker than at the end of last year, the exchange rate of hryvnia. In the future this figure will decline by 2-3 percentage points a year due to the economic growth and prudent fiscal policy.
Ukrainian experts believe that the published in June, the International monetary Fund’s forecast with respect to the fall of Ukraine’s economy in 2020 to 8.2 per cent is more realistic than the government’s forecasts and the National Bank.
A stable hryvnia and the issue of Eurobonds
This week, the hryvnia pleased with Ukrainians relative stability. National currency at the official exchange rate hovered around 27,69 hryvnia to the dollar. As a result, the national Bank on Monday, August 3, set the rate of hryvnia to the dollar at 27,68 UAH/USD., that is, the national currency has strengthened by 1 penny in comparison with the previous indicator.
The head of Ukrainian government this week once again assured that he would not interfere in the work of the National Bank and push it to the weakening of the hryvnia and warming up by inflation. The government has no plans in this way to stimulate the development of the industry.
Another financial news. This week the Ministry of Finance has completed the calculations made a week earlier, the issue of Eurobonds of two billion dollars with an interest rate of 7,253 percent and maturing in 2033. This transaction has allowed Ukraine to optimize the servicing of external debt and to reduce financing risks in the coming years.
In addition, this week the State statistics service reported on the growth of average nominal wages of regular workers in Ukraine in June compared with the same month in 2019 7.4 percent to 11 579 USD.
While real wages in June compared with the previous month increased by almost ten percent, and in comparison with June of 2019 – nearly five.
In the last week of July came news from the International rating Agency S&P Global Ratings. It raised the long-term credit rating of “Ukrzaliznytsi” from “CCC” to “B-“, which means the company’s performance of obligations under securities. This is a good signal for stable functioning of the Ukrainian Railways, which provides more than 80 percent of freight and about half of passenger traffic carried by all modes of transport in the country.
The increase in electricity prices
This week energy company YASNO (previously worked under the brand DTEK), which provides electricity to consumers of Kiev, reported an increase in the cost of electricity for small residential customers do not.
Thus, from August 1, small and medium businesses on average will pay for electricity consumption by up to 6 percent more.
Changes in prices for services connected with increase of tariffs for transmission and distribution, which was approved by the national Commission, carrying out state regulation in spheres of power and utilities (NKREKU).
It is worth Recalling that the national Commission since August has revised the tariffs for distribution of electricity to regional power, and also twice increased the rate for the state-owned company “Ukrenergo”. This means that the increase of tariffs for light and offers entrepreneurs throughout the country.
In addition, this week the national Commission temporarily increased the maximum limit of the price of electricity on the market “day ahead” market and vnutricletocnam at night from 959 to 1229 hryvnia per megawatt-hour. It will also allow producers to sell electricity more expensive.
The regulator explained this step the fact that thermal generation at night sells electricity in these markets below cost, as the current limitation at a price not sufficient to cover the cost of production of electricity.
It is noteworthy that in Ukraine two thirds of the assets of thermal coal owned by the DTEK businessman Rinat Akhmetov.
Meanwhile, the Antimonopoly Committee drew attention to the Governor’s actions and accused the national Commission of inactivity on the market of electrical energy, which creates conditions for violations by business entities of the legislation on economic competition.
At the same time, the decline of electricity consumption in the country due to quarantine forces of generation to reduce output. According to the State statistics service, power plants of Ukraine for six months of the current year has reduced the production of electricity by 11.4 per cent compared to the same period last year, up to seventy billion kilowatt-hours.
Thermal power plants produced 16.4% less resource, nuclear – 7.7 percent, the hydro power plant of 22.5 percent. While alternative power generation (solar and wind) for six months in 2020 increased by 12.9 and 19.6 percent, respectively.
On the last working day of July President Vladimir Zelensky has signed a law which, in particular, reduced “green” tariffs for solar and wind power. The document will give impetus to the formation in Ukraine of a fair price of alternative energy.
Next week will be marked by revolutionary changes in the energy market. So, from 1 August in Ukraine will start working the competitive market of gas for the population, where each consumer can choose the supplier of the fuel. In addition, the state Treasury will unveil the dynamics of a single Treasury account and information on the revenues of the state budget.