2014-01-03 13:39:53 - New Country Reports market report from Business Monitor International: "Ukraine Business Forecast Report Q1 2014"
In line with our view for Ukraine to enter a recession, real GDP contracted for a third consecutive quarter in year-on-year terms, shrinking by 1.5% on the back of weak exports and minimal fixed capital investment.
We see political risks as likely to threaten growth over the next 12 months, as the government is forced to decide over closer relations with the EU or Russia.
Major Forecast Changes
We have downgraded our outlook for real GDP growth for 2013 and 2014, and now expect GDP to contract by 1.4% in 2013 and grow by just 0.4% in 2014. This change reflects our bearish outlook for global metallurgical markets next year, our expectations for hryvnia devaluation, and expectations of a retrenchment in government spending.
Report Details at
- www.fastmr.com/prod/759047_ukraine_business_forecast_report_q1_2 ..
Key Risks To Outlook
A sharper than expected devaluation could trigger major shockwaves through the domestic economy, particularly within the financial sector which has barely recovered from the 2008 devaluation. Existing capital buffers may prove insufficient to deal with a devaluation of 20% magnitude or greater.
We see significant downside risks to our fiscal deficit forecasts, as government energy spending looks set from already elevated levels in the winter months.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
eu integration Dead in the Water
- The collapse of historic Association Agreement talks between the EU and Ukraine points towards a path of long-term economic and political stagnation for Ukraine. While closer ties with Russia may be positive for near-term economic stability if a deal on cheaper gas can be struck, the odds of positive economic and political reform gaining momentum over the next few years will decline significantly.
TABLE: PoLITICAL ovERvIEW
Long- term political outlook
at a political crossroads
- Ukraine's long-term political trajectory is far from certain, with the coming years likely to prove crucial to the country's convergence prospects over the next decade. Weak institutions remain the greatest challenge to long-term stability, though we also highlight systemic tensions in bilateral relations with Russia and growing demographic issues as additional threats likely to confront future governments. Going forward, the most likely scenario is a future where Ukraine remains torn between closer relations with West while remaining under Russia's sphere of influence.
chapter 2: economic outlook
BMi economic risk ratings
taBle: econoMic actiVity
Further capital controls Likely
- As of october 11, the National Bank of Ukraine will force all companies and private individuals from abroad to sell their FX revenues: a strong signal that the authorities are struggling to contain exchange rate pressures. Without addressing its current account issues, capital controls will ultimately fail to contain international reserve erosion, although we believe that there is a strong risk of total bans on FX purchases and import restrictions in the near future.
taBle: M onetary P olicy
too Little, too Late
- Ukraine's government has announced that it is seeking ways to bring the 2014 bud get deficit down to between 2.0 -3.5% of GDP. With its credit rating cut to that of Greece's by S&P (B-) and virtually zero access to international capital markets, and major foreign currency debt refinancing requirements ahead this plan is driven by necessity rather than fiscal prudence. We maintain our core view that the risk of a credit event in the coming quarters is high.
taBle: fiscal P olicy
Balance of payments
time running out For external intervention
- With international reserves steadily eroding, the economy is susceptible to a balance of payments crisis within the next three to six months without external assistance. With Ukraine appearing to turn away from the West, a likely solution at this juncture will probably arrive in the form of cheaper gas from Russia, although nothing is guaranteed at this stage.
taBle: current account
chapter 3: 10-Year Forecast
ukraine's economy to 2022
colossal structural reform needed to see through the Decade
- Having failed thus far to break free from its dependence on cheap energy and a low-value added export base, Ukraine has arguably squandered the economic windfall experienced over the last 10 years. While there is still enormous unrealised potential in terms of political reform and economic catch up, without institutional and economic reform, Ukraine's current economic growth model will prove unsustainable over the coming decade.
taBle: lonG-terM Macroecono Mic forecasts
chapter 4: Business environment
BMi Business environment risk ratings
Business environment outlook
taBle: BMi B usiness and oPeration risK ratinGs
TABLE: BMI LEGAL FRAMEW oRK RATING
taBle: laBour force Quality
TABLE: EMERGING EURoPE - ANNUAL FDI INFL oWS
taBle: trade and inVest Ment ratinGs
chapter 5: Key sectors
taBle: construction and infrastructure industry data and forecasts, 2011-2016
oil & Gas
Full Table of Contents is available at:
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