Moody's Investors Service has worsened its outlook for Ukraine's banking system from positive to stable, pointing out the risks associated with the growth in consumer lending.
Moody's estimates that the systemwide problem loan ratio will fall to about 54% by the end of 2020 from about 69% at the end of 2018, mainly driven by loan growth and loan write-offs, according to a statement on its website.
The agency warns that further fast growth in consumer loans may hurt asset quality in the longer term, forcing regulators to take preemptive measures, but rising household income will help contain defaults within the next 12-18 months.
"Rapidly growing consumer loans will pose risks to asset quality in the longer term," said Lev Dorf, AVP-Analyst at Moody's.
The stability of Ukraine's operating environment will also depend on its ability to continue to work with the International Monetary Fund, the agency added.
As UNIAN reported earlier, the IMF mission was working in Ukraine to assess the fulfillment of the conditions for disbursing another US$1.3 billion under the current Stand-By Arrangement (SBA) and to consider the issue to ensure criminal liability for illegal enrichment introduced within the previous program, but canceled by the Constitutional Court of Ukraine in February 2019.
Volodymyr Zelensky officially became President of Ukraine on May 20, 2019. During his swearing-in speech, he announced the dissolution of the Verkhovna Rada, Ukraine's parliament, and called on the Ukrainian government to resign.
The presidential decree on the dissolution of parliament entered into force on May 23. The early elections are scheduled for July 21.
Following an IMF mission visit to Kyiv in May 2019, the IMF said it would resume negotiations on further cooperation with Ukraine after the parliamentary elections and the formation of a new Cabinet of Ministers.