Week's balance: New outlook by World Bank, reboot of EU association deal, and IMF talks
The World Bank has improved the forecast for the Ukrainian economy development, the Cabinet of Ministers updated the plan for the implementation of the Ukraine-EU Association Agreement, while IMF talks are still ongoing – these are the main economic developments of the outgoing week.
This week, one of the key lenders of Ukraine, the World Bank, announced updated forecasts for the economic development of our country. In particular, the bank improved to 3.6% its forecast for this year's real GDP growth, with inflation at the end of the year set at 6.4% and a moderate budget deficit of 2% of GDP. Next year, the bank expects GDP growth almost at this year's level, and in 2021 it suggests growth acceleration to 4.2%.
Over the nine months of this year, the World Bank estimated economic growth at 3.7%-3.8%, naming as key drivers record-high crops of grains and oilseeds, as well as trade and the financial sector. Statistical figures in these areas are encouraging.
Last week, the State Statistics Service released data on 10% retail sales growth in Ukraine in January-October, while the National Bank reported another record profit indicator for banks over the said period at UAH 52 billion. At the same time, the decline in industrial output in October in annual terms accelerated to 5% after falling by 1% in September.
Meanwhile, it is obvious that Ukraine is steadily building up its potential in the agricultural sector. That is why the World Bank has high hopes for land reform that has started in Ukraine, expecting that its implementation will bring an additional 0.5-1.5 percent of annual economic growth for the next five years.
According to the lender, agriculture in Ukraine has great prospects, while a moratorium on farmland sales has become the main obstacle to attracting investment in the area. Therefore, according to WB, the draft law on land circulation adopted by the Verkhovna Rada at first reading in November should be put into effect at the earliest opportunity along with laws on open access to land cadastre data, land transfer procedures, local regulation, and mandatory e-bids.
At the same time, the World Bank considers as important the step to ensure small farms' access to financing and provide state subsidies for farmers in order to stimulate output growth, manufacturing products with higher added value, and applying new technologies.
New impulses for European integration
Last week, the Cabinet of Ministers updated the action plan for the implementation of the Ukraine-EU Association Agreement. As the government explained, the new plan takes into account the deepening of bilateral relations and is aimed at achieving compliance with European criteria for the country's accession to the EU.
Updated tasks relate to customs and financial policies, taxation, entrepreneurship, financial services and competition, as well as justice, social and humanitarian issues, transport, energy and energy efficiency, digital, science, technology and innovation, and environmental management.
The Cabinet of Ministers believes that updating the plan will "upgrade the software of the operational system" of Ukraine's European integration and accelerate its movement toward the European Union, at the same time making such movement more transparent, and the government – accountable to citizens.
In this regard, Deputy Prime Minister for European and Euro-Atlantic Integration Dmytro Kuleba introduced the "Agreement Pulse" monitoring system, which allows real time monitoring of action plan fulfillment and shows officials responsible for specific tasks.
The system outlines specific tasks in the areas of public life that are covered by the Association Agreement. The total number of tasks set exceeds 2,000, while more than 70 performers are required to take about 7,500 measures toward their implementation.
This week, the IMF staff mission, which arrived in Kyiv on November 14 to discuss a new cooperation program, is completing its work. The statement on the review results is yet to be released...
Commenting on the course of negotiations, the head of government stopped short of naming any specific dates for the launch of the new program or its parameters, offering to wait for the results of the mission's visit.
"I believe there has been tremendous progress in working with the International Monetary Fund over the past two months. We understand each other much better and have taken many steps towards each other. I see tremendous progress and expect that this work will yield results in the near future," Honcharuk said.
It's not only Ukraine who awaits the creditor's decision. Last week, G7 envoys (USA, UK, Canada, France, Italy, Germany, and Japan) announced that the new program with the IMF is crucial for Ukraine's macroeconomic stability.
The authorities also realize this. "Continued cooperation with the IMF is now one of the Ukrainian government's priority tasks," said NBU Governor Yakiv Smolii during a meeting with U.S. Chargé d'Affaires in Kyiv William Taylor.
Most likely, the details of Ukraine's agreements with the major creditor will make key news next week.