Week's balance: Poroshenko "turns on" heating, U.S. vows energy support, while GDP growth slows down
President Petro Poroshenko had to personally intervene to ensure a belated start of the heating season in the town of Smila, which is evidence of acute problems in the country's energy sector; U.S. Secretary of Energy Rick Perry during his Kyiv visit promised support in the energy field; while GDP growth rates declined – these are the key economic news of the outgoing week.
This week was marked by the first cold snaps across Ukraine and the failed start of the heating season in a number of cities and towns. On Monday, a rally was held outside Kryvyi Rih's local gas distribution company headquarters, where people demanded heating. The thing was that one of the heat supply companies, the Kryvyi Rih heating plant, was unable to provide services because of its debts to Naftogaz of Ukraine.
In addition, half of the apartment buildings in Kherson saw no heating due to the debts of the local CHP plant. Because of the debt to Naftogaz, a school and kindergartens in the town of Smila (Cherkasy region) were suspended, while local hospitals switched to a limited operation mode. A state of emergency was declared in the town with a population of 17,000 so, eventually, President Petro Poroshenko intervened in the situation personally. During the meeting of the operational headquarters of the State Emergency Service, the head of state demanded that the municipal authorities provide heat within hours.
“If someone in Smila, or even in Kyiv, cannot make a decision, or is afraid to 'break the seal,' then I'm taking such decision. Give people gas and heat immediately, under my responsibility,” Poroshenko said, adding that heating is the direct responsibility of municipal authorities, and that is exactly part of the ongoing decentralization process.
"Turning the valve is not something a president should be doing," Poroshenko stressed. He also called on law enforcement agencies to investigate into what had caused the crisis.
Prime Minister Volodymyr Groysman also severely criticized local authorities, who disrupted the start of the heating season.
“I was forced to work around the clock to unblock with my decisions the issues on Kryvyi Rih, Pavlohrad, and Kherson,” the head of government said at a Cabinet meeting, threatening to appeal to the Verkhovna Rada for a dismissal of mayors in question.
In order to avoid such situations in future, the Cabinet decided to prohibit disconnecting heating companies from gas supplies during the heating period, and also reduced the required level of settlements with Naftogaz for gas supplies to TPPs and CHPs in the period from December 1, 2018 to April 1, 2019 .
In addition, the government announced its readiness to provide the town of Smila a UAH 25 million loan to launch the heating season. By the way, the debt of the town's heat supplying enterprise to Naftogaz amounts to UAH 85.5 million.
U.S. energy support
The topic of enhancing the modernization of the country's energy sector and resolving the existing energy problems in the outgoing week was brought to a foreign policy level during the Kyiv visit of U.S. Secretary of Energy Rick Perry.
During meetings with the Ukrainian authorities, the American official said that our country could "count on" the U.S. as a responsible energy partner, as well as America’s rejection of Russia's activities to promote the construction of gas pipelines bypassing Ukraine - Nord Stream-2 and Turkish Stream.
"And the reason is clear. The citizens of Europe, the citizens of Ukraine in particular should never be held hostage by a single source of energy," Rick Perry said, adding that no nation should use such dominance in gas supplies to create pressure or force other countries to anything, as Russia is trying to do in relation to Ukraine.
According to Perry, the geographical location and the substantial reserves of natural resources allows Ukraine to become the “Texas” in Europe, while many American companies are interested in cooperation with our country in the field of energy.
In response, Prime Minister Groysman said that Ukraine sees a number of opportunities for deepening cooperation with the U.S. in the energy sector, while Speaker of the Verkhovna Rada, Andriy Parubiy, called on American investors to co-manage the Ukrainian gas transmission system.
Slowing economy growth
In the outgoing week, the State Statistics Service released some not so pleasing data showing that Ukraine’s growth in the third quarter in annual terms slowed down to 2.8% from 3.8% a quarter earlier. The growth against the previous quarter, taking into account the seasonal factor, was only 0.4%, whereas in the previous quarter the indicator was at 1%. That is, Ukraine’s GDP in annual terms is growing for the eleventh quarter in a row, however, this growth for the first time and quite significantly slowed down after accelerating for two quarters in a row.
Official statistics turned out to be worse than preliminary estimates of the traditionally conservative National Bank, which predicted economic growth in the third quarter at 3.1% in annual terms.
Regarding foreign trade, the State Statistics Service said Ukraine’s foreign trade balance for the first nine months of 2018 was reduced to a deficit of $3.5 billion, which is three times the deficit for the same period of the previous year. The import of goods and services to Ukraine this year is growing almost twice as fast as exports.
Also in the outgoing week, the Accounts Chamber once again stated that the target for revenues to the general fund of the state budget has not been met, as the fund in January-September failed to receive UAH 94 billion. According to the agency head, Valeriy Patskan, this was the main reason for non-fulfillment of the expenditure plan for the first three quarters at almost UAH 58 billion, which could result in non-fulfillment of the state budget for 2018 as a whole.
Next week may be decisive for the Ukrainian economy if the parliament, as planned, will consider the revised draft state budget of Ukraine for 2019. The text of the document has not yet been made public, but, according to the Ministry of Finance, the deficit remained unchanged at 2.3% of GDP. Passing the bill in its second reading before December will allow to expect access to funding from the International Monetary Fund under the new program as early as this year and will not overshadow the upcoming New Year's holidays with another drop of the national currency.