Week's balance: Ukraine stats agency reports on accelerated economy growth, government speaks of priorities for 2019, while president urges foreign businesses to invest in Ukraine
The State Statistics Service reported on a faster economy growth in the fourth quarter of 2018, the government submitted its annual report and announced priorities for 2019, while President Poroshenko called on foreign businesses to invest in Ukraine – these are the main economic news of the outgoing week.
One of the key economic news this week was the government's annual report. Presenting the document, Prime Minister Volodymyr Groysman noted a gross domestic product growth by 3.2% (according to preliminary data) a reduction in the budget deficit to levels below targets, an increase in budget revenues from customs fees, and also spoke of reform plans for 2019.
According to the prime minister, the budget deficit of Ukraine in 2018 decreased to 1.7% of GDP, with a target of 2.4%, while the indicator of public and publicly guaranteed debt was down to 60.9% of GDP.
The country's budget in 2018, Groysman said, increased by 17% compared with 2017 and by one and a half times compared with 2016.
Among other positive trends in the economy last year, the head of government noted a decline in consumer inflation below 10%.
Besides, last year, due to the growth of foreign trade and the fight against shadow schemes, Ukraine saw higher customs revenues. According to the prime minister, in 2018, Ukrainian customs increased revenues to the state budget by UAH 53 billion.
According to the prime minister, last year the Cabinet allocated from the state budget about UAH 3 billion to modernize the country's defense industry, which laid good foundations for re-equipping the Ukrainian army and navy with the newest Ukraine-made weapons.
Groysman also noted the success of the agricultural sector: in 2018, agribusinesses provided the country with 39% of the total foreign currency inflows. At the same time, the prime minister added, in 2019, the government intends to continue supporting the agricultural sector.
Speaking about plans for 2019, Groysman noted that the government would continue decentralization reform. According to him, until 2020, the entire population of Ukraine should live within united territorial communities, whereas today, it's only 68%.
Incidentally, last year, the government transferred to UTC ownership 1.4 million hectares of state land outside settlements. In 2019, the process will continue.
According to the prime minister, the government’s 2018 report will be submitted to parliament so that the deputies could study it and consider endorsing the document.
In 2019, the government also intends to continue work on the creation of an Export Credit Agency. To this end, at a Wednesday government meeting, the order was approved on using the state budget funds to create and organize the work of this body.
Faster economy growth
In the outgoing week, the State Statistics Committee reported some good news about the accelerated growth of the national economy in the fourth quarter of 2018 in annual terms to 3.4% from 2.8% a quarter earlier. By the previous quarter, the country's economy in October-December 2018 grew by 1.1%.
Thus, the gross domestic product of Ukraine in annual terms has been growing for the twelfth quarter in a row.
The State Statistics Service also reported that against the background of accelerated growth in imports over exports, the deficit of the country's foreign trade balance increased 2.3 times last year, to $5.8 billion. In particular, imports of goods and services to Ukraine increased by 14.3% this year, up to $62.9 billion, and exports – by 8.6%, up to $57.1 billion.
According to the State Statistics Service, the deficit in foreign trade in goods in 2018 increased one and a half times to $9.8 billion; at the same time, the surplus of foreign trade in services increased by 15.5% to $6.0 billion.
Priorities for Ukraine authorities
Head of state and head of government on Tuesday at a meeting with Ukrainian and foreign investors, organized by DragonCapital investment company, shared their vision of the country's development in the difficult year of presidential and parliamentary elections.
Petro Poroshenko, who is running for re-election this year, promised in 2023 to apply for Ukraine’s accession to the European Union and receive a NATO Membership Action Plan.
In addition, the president expressed hope that the Verkhovna Rada would soon adopt the law on the creation in Ukraine of the National Bureau of Financial Investigations to finally remove security forces from having any influence on businesses.
Against the background of continued economic growth and the strengthening of the hryvnia, the president also called on foreign investors to invest in Ukraine.
“Today it is impossible not to invest in Ukraine: for twelve quarters in a row, the economy has been growing, 3.4% of GDP growth in the last year is the largest economic growth in the last seven years. The banking system is stable and today shows record profits. Hryvnia, while gold reserves are being maintained and built up, is strengthening," said Poroshenko.
Among the attractive areas for investment, the president noted the agricultural sector, the processing industry, the IT sector, logistics, engineering, and tourism.
Prime Minister Groysman called the achievement of economic growth at a level above five percent one of the main priorities of the Ukrainian authorities.
"For us, a priority is economy growth above five percent. To this end, investments are needed. For investments to come, we need clear rules and security guarantees for these investments," the prime minister said.
He noted that Ukraine has enormous potential for growth, but to achieve acceleration, structural reforms and a fair judicial system are required.
Groysman expressed confidence that the Anti-Corruption Court would be created in Ukraine in 2019, and a high-quality system of tax and customs agencies would be set up.
The prime minister also expressed confidence that the reform of the State Fiscal Service will be completed as early as this year.
"I think that in 2019, I will do everything to this end, and here I have optimistic forecasts, because our Finance Minister Oksana Markarova is dealing with this. We will be able to build a quality service system for the tax and customs agencies in Ukraine," added Groysman.
Slower inflation and easing of monetary policy
National Bank Governor Yakiv Smolii, who also participated in the investment forum, noted that the central bank predicted a slowdown in consumer inflation to 6.3% this year, while the January figures only confirm that this forecast is realistic.
According to Smolii, when inflation enters the projected corridor, the central bank will have grounds for easing monetary policy.
The country's key creditor, the International Monetary Fund, this week praised Ukraine for its efforts to eliminate imbalances in the economy, but noted the importance of advancing in other areas of reform. In particular, IMF permanent representative in Ukraine, Jost Ljungman, who spoke at an investment conference in Kyiv, noted that the Fund had not yet seen radical changes in the level of corruption in the country.
"We have not yet seen any drastic changes in the level of corruption. Although institutions were created that will help fight corruption," said Ljungman.
The IMF representative called on the authorities to focus on the need for long-delayed land reform, reforming tax and customs services, speeding up privatization of state-owned enterprises, and giving up state control over gas tariffs.
The third week of February also promises to be full of important economic news. In particular, the State Statistics Service will report on January performance of the country's transport industry and social subsidy data.