2014-03-17 07:29:01 - Ukraine Business Forecast Report Q1 2014 - a new country guide report on companiesandmarkets.com
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.
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.
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.
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