The European Bank for Reconstruction and Development (EBRD) forecasts that structural reforms in Ukraine may slow due to presidential and parliamentary elections in 2019.
"Ukraine's GDP is forecast to grow by 3.5 per cent in 2018 and by 3.0 per cent in 2019, although the political economy context may become less conducive for structural reforms ahead of the new election cycle in 2019," the EBRD said in its Transition Report for 2018-2019.
Growth has gained some momentum but remains modest, while the emigration of working-age people has intensified. "This has led to labour market pressures and is dragging down industrial output growth," the EBRD said.
The country will require continued IMF and donor support, and consistent access to international capital markets to address foreign exchange debt payment liabilities falling due in 2018-2020.
According to EBRD experts, Ukraine needs to refinance foreign exchange public debt liabilities falling due in 2018-2019 without draining foreign exchange reserves to maintain the confidence of investors and strengthen the medium-term outlook. "Continuation of engagement with the IMF remains vital in this respect," the EBRD said.
The EBRD also advises that reform of the state-owned banks should be vigorously pursued. "Emphasis should be placed on the execution of the corporate governance reform and transformation of the state-owned banks, thus leading to their privatization," it said.
In addition, the EBRD says Ukraine should step up implementation of recently adopted energy sector laws. "Unbundling of the gas transmission system operator from Naftogaz and implementation of its corporate governance action plan, together with the establishment of the gas exchange, are priorities. The Public Sector Obligation (PSO) of Naftogaz and its subsidiaries requires an overhaul to phase out subsidisation and incentivise payment discipline by utility companies," the report said.