Week's balance: EU calls on Ukraine to continue reform, giving EUR 200 mln to support businesses, while inflation accelerates
The European Union has called on Ukraine to pursue launched reforms and gave EUR 200 million to support businesses in the context of coronacrisis, while the statistics agency reported on accelerating inflation – these are the key economic developments of the outgoing week.
The second week of February saw important talks between Ukraine Government and the European Union officials, where the parties discussed prospects of the country's integration into the EU and further deepening of economic cooperation.
Despite the global coronavirus pandemic, this week EU officials invited Ukrainian Prime Minister Denys Shmyhal to Brussels for a series of meetings climaxing in the Ukraine-EU Association Council on Thursday.
The Council reaffirmed the intention of both parties to start negotiations on the liberalization of trade in goods within the Free Trade Area. First of all, this is about Ukraine's will to have quotas increased for agricultural supplies to the EU.
"Today, we agreed on further practical steps to launch a comprehensive review of the agreement's objectives and launch a dialogue on updating the Deep and Comprehensive Free Trade Agreement," Shmyhal said, adding that the EU is the country's largest trading partner, retaining a 41% share of its foreign trade.
According to the Cabinet chief, strengthening sectoral cooperation and gradual integration into the EU's internal market are Ukraine's priorities.
The country, Shmyhal noted, is counting on significant progress this year in approaching the so-called "industrial visa-free regime" with the EU.
A joint statement issued following the Council's meeting o also states that in the near future the parties will conduct an internal assessment of the Association Agreement's achievements, to be presented at the Ukraine-EU summit in summer 2021.
More decisive reforms
EU Commissioner for European Neighborhood Policy and Enlargement Oliver Varhelyi, speaking at a press conference following the meeting of the Association Council, said that the European Union expected the Ukrainian authorities to continue reforms and resolutely fight corruption.
Vice President of the European Commission, EU High Representative for Foreign Affairs and Security Policy Joseph Borrell noted the special importance of implementing judicial reform.
"This is the mother of all reforms. You cannot pretend to have rule of law, human rights, whatever you want, without an independent and efficient judiciary system," he said.
The EU, Borrell stressed, fully supports Ukraine's sovereignty and territorial integrity, encouraging Ukrainian authorities to persevere in pursuing the reform agenda and standing ready to support the country in gaining access to COVID-19 vaccines.
In turn, Varhelyi said that Ukraine could receive this year the second tranche of macro-financial assistance in the amount of EUR 600 million.
The European Union also provided EUR 200 million assistance to Ukraine to support businesses during a strict quarantine, said European Commission President Ursula von der Leyen.
Common aviation space
At the Brussels meetings, EU officials also confirmed their intention to sign a Common Aviation Area Agreement with Ukraine in the near future. This will equalize the rights of Ukrainian and European companies, remove the monopoly on certain routes between airports in Ukraine and those across the EU, and, consequently, allow for cheaper fares.
Negotiations to this end have been going on between Kyiv and Brussels for at least seven years already. The process was held up due to a dispute between Britain and Spain over civil aviation flights to Gibraltar.
And only after Brexit did the situation begin to clear up.
According to Borrell, the EU's foreign affairs and security envoy, the agreement will be signed when EU officials complete an update of the document on excluding the UK from the list of signatories.
"We expect that the Common Aviation Area Agreement will be signed between Ukraine and the EU as soon as possible. Ukrainians have long been waiting for this," Shmyhal said.
Higher inflation pace
Last week, the State Statistics Service reported higher inflation in January. Last month, consumer prices rose 6.1% on year. Compared to December 2020, consumer prices were up 1.3%.
The increase in electricity tariffs by 36.6%, sewerage by 17.3%, and water supply by 10.9% significantly affected the rate. This, respectively, led to a 6% increase in prices for housing, water, gas, and other fuels.
On the food market, egg prices rose the most, by 15.4%. Vegetables, sugar, sunflower oil, poultry, bread, beef, grain products, and cheese also went up by 1.0% to 6.5%. At the same time, pork prices dropped by 1.3%.
The National Bank noted that inflation was expected to accelerate in January and exceeded the target cap of 5% plus or minus 1 percentage point.
Last week, economy minister Ihor Petrashko said that the ministry estimated GDP drop in Q4 2020 at 1%. He stressed that the government maintains its outlook for economic growth in 2021 at 4.6%.
"Currently, the conditions for economic recovery are quite favorable, actually. It is clear that at some point everything won't just change for the better. But our forecast for 2021 suggesting growth of 4.6% we leave unchanged and believe is quite likely," said Petrashko.
Next week promises to be no less eventful. Deputies will convene in the Verkhovna Rada to hold plenary sessions, while the stats agency plans to publish data on the foreign trade balance in 2020, as well as an estimate of GDP for the 4th quarter of 2020.
The next week will be especially frosty and increase the load on the country's unified energy grid.