Week’s balance: economy sees growth, Avdiyivka sees fire, while energy tariffs see opposition from businesses

Electricity supplies to Avdiyivka and the local coke plant have been cut off amidst fierce fighting; Russia’s fearmongering over gas supplies has failed to impress the European Union; Ukrainian economy is growing and budget revenues – increasing, while the National energy regulator once again adopts scandalous decisions - these are major economic news of the past week.

The Ukrainian economy in 2016 showed growth for the first time, at the level of 2%, that’s according to the Ministry of Economic Development and Trade, although just a week ago the ministry reported a 1.8% growth.

According to the ministry’s experts, in 2016 the key factors of economic growth were the growth in consumer demand and the recovery of the production capacity, services, trade, transport, and especially the construction industry and agriculture, rather than the external environment in the commodity markets.

The experts have already mentioned earlier the fact that agriculture acted as a driver of economic growth in 2016. Minister of Agrarian Policy and Food Taras Kutoviy in an interview with UNIAN emphasized the importance of agriexports, which accounted for over 42% of all Ukrainian exports. "Our exports [of agricultural products] in 2016 increased by 4.5%, which is a good rate. This is more than $15 billion in the structure of foreign currency inflows," the minister said.

"I believe that the sector performs well. The question is, how much taxes is paid and how many jobs are created. I'd like to see all the records and achievements in the industry transform into good jobs and higher wages for farmers," he added.

By the way, the fact that Ukraine witnesses macroeconomic stabilization, while agriculture is one of the most attractive sectors for investors, is evidenced by another marker - market capitalization of Ukrainian agricultural businesses, whose shares are listed on the international financial markets, as of January 30, 2017, increased by 50% compared to the same date last year, amounting to $3.2 billion. According to analysts, the value of the shares of Kernel, Astarta, and MHP increased most.

The hryvnia also performed well last week. After a sharp drop at the beginning of the year, the national currency began to show signs of strengthening.

The State Treasury reported some good news as well. According to its report, the state budget received more than UAH 59 billion in revenues in January 2017, which is 38.7% more than the target. As we know, for many years, January has traditionally been difficult - the economy has always generated less revenue to the Treasury than planned, because of the long New Year holidays.

Now we see the opposite picture. It’s no surprise that the balance in the single account of the State Treasury increased by 2.4 times compared to the previous month, amounting to UAH 34 billion.

The Ministry of Economic Development and Trade expects that the positive trends will strengthen in 2017, however it’s not yet time to relax. The amount of public debt of more than $70 billion reminds us that this year will be a difficult one. Meanwhile, the Ministry of Finance estimates the total payments on public debt in 2017 at the expense of state budget funds at UAH 240.897 billion. To pay the debt without the continued cooperation with the IMF will hardly be possible.

Don’t trust the Kremlin

Frosty January once again updated the issue of whether there will be enough gas in storage to pass safely this heating season. Ukrtransgaz, the operator of Ukraine’s gas transport system, said there is no reason to worry. Although gas reserves in underground storage facilities in January decreased by 17.6% down to 9.8 billion cubic meters, there will be enough gas to pass the heating season. Moreover, Ukraine continues to accumulate both its own and imported gas.

Traditionally, against the background of low temperatures, Russia sings the same old song that Ukraine is allegedly stealing its gas to and scares Europe with interrupted supplies. But given the fact that the song is in fact a lie, Europe didn’t fall for it and said that despite the harsh winter, everything is going well, which was confirmed by Vice-President of the European Commission for Energy Union Maros Sefcovic, who said that the EU keeps abreast of the issue and sees no violations.

Maros Sefcovic: EU does not see any evidence of violations of gas transit by Ukraine / Photo from UNIAN

In addition, Sefcovic noted that Russia was using only half the capacity of the Ukrainian GTS.

Avdiyivka with no electricity

Russian-occupation forces have resumed heavy fighting around Avdiyivka / Photo from UNIAN

The Kremlin decided to intensify military operations in the Donbas. Russian-occupation forces resumed fierce fighting around Avdiyivka, the town where Europe's largest coke plant is located. Russian mercenaries destroyed power lines, and the town along with the plant remained without electricity and heat. The whole country rushed to the aid, sending warm clothes, food and heating points.

In the middle of the week, CEO of Avdiyivka coke plant Musa Magomedov said that the company continued to provide minimal heating of the town with the help of its own generators, working on coke oven gas. He added that the plant expected the ceasefire to be able to restore power lines. However, the hostilities never ceased.

If Putin orders to completely destroy the plant, more than 4,000 people will lose their jobs, while the business empire of Rinat Akhmetov, which includes the coke plant in Avdiyivka, will face certain difficulties. Although, Akhmetov has sufficient financial resources to resolve the problem. After all, mining companies alone are supposed in the near future to transfer to the shareholder business group, Rinat Akhmetov, more than UAH 19 billion in dividends.

Along with the intensification of the military confrontation with Russian militants, there arose a problem with the activists who set up a blockade of the railway tracks in the direction of the occupied eastern territories. The public has no consensus on this issue. Some support the move, while the others believe it is just populism.

The activists blocked rail tracks toward the occupied territories / facebook.com/shtab.blokady

Security services oppose the blockade. In particular, in the SBU stated that as a result of the blocking, the state suffered a UAH 35 million loss. If the blockade continues, the country will face rolling blackouts due to coal shortage.

After this statement, the issue is being actively discussed in the social media of a huge debt of the occupied territories, which reached billions of hryvnias.

Businesses against energy regulator

NEURC chief Dmytro Vovk / Photo from UNIAN

Meanwhile, the National Energy and Utilities Regulation Commission (NEURC) has once again shocked the businesses with a scandalous decision. This time the agency approved the specific cost of the non-standard connection (connection of an electrical power unit with an over 160 kW capacity) to electric networks for 2017 at a level ranging from UAH 3,000 to UAH 9,400 per 1 kW. And then the row began...

The first bell was rung by representatives of the renewable energy sector, who believe that such a solution will definitely increase the cost of connection of solar and wind power plants by few times, which will have a negative impact on the investment attractiveness of this industry in Ukraine. The construction sector shares the same concerns, claiming that the cost of real estate will grow by many times. “In fact, the developers will not be able to operate, and it will lead to the collapse of the entire construction market," said the president of Kyivmiskbud, Ihor Kushnir.

Oleksandr Kunitskiy (UNIAN)

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