Week's balance: Return to adaptive quarantine, infrastructure promises, and decline in industrial output

20:00, 27.02.2021
4 min. 1597

The government decided to revisit the adaptive quarantine model, as well as set to index pensions by 11% in March; President Volodymyr Zelensky vowed to continue a large-scale campaign on construction of roads and bridges; and the State Statistics Service announced a decline in industrial output in January – these are the main economic developments of the outgoing week.

The last week of winter pleased Ukrainians with a long-awaited thaw. The first sunny days led the country out of hibernation, while Ukrainians put in the back shelves their warm clothes and take time to reflect about their future life in the context of the ongoing coronavirus pandemic.

Finally, this week, Ukraine launched COVID-19 vaccination. Timid hopes that the country would eventually return to its normal rhythm without those mandated masks and the annoying social distancing are not bound to come true any time soon. In a number of regions, daily cases have been growing rapidly: the threat lingers.

In this regard, the Cabinet of Ministers has put the country back into adaptive quarantine starting February 24, with four hazard levels in place – green, yellow, orange, and red. At the moment, the yellow level is the base for the country.

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As of the end of the week, Chernivtsi and Ivano-Frankivsk regions were in the red zone, and seven more regions got into the orange zone.

The Cabinet has banned passenger traffic by road, rail, and urban electric transport in red zone regions.

Ukrzaliznytsia from February 26 to March 12 suspended ticket sales for trains running to Ivano-Frankivsk region. At the same time, the company did not cancel the very trains to ensure transportation of passengers who had booked their tickets earlier, including to prevent uncontrolled, shadow passenger transportation.

Continued large-scale road construction

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Last week, Ukrainian President Volodymyr Zelensky took part in the Ukraine 30. Infrastructure Forum, where he addressed participants, promising to build and repair 6,500 lm-worth of national and local motorways this year.

"Our target for 2021 is not shrinking. This is 4,500 kilometers of state roads and 2,000 kilometers of local roads. In addition, we have several very ambitious priority projects. One of them is the Kyiv bypass. We plan to start its implementation already this year. Its total length is 150 kilometers," the head of state said.

"Another ambitious project is the M-30 highway [Stryi – Izvarino]. This will be the longest road in Ukraine, 1,400km-long, which will connect the east and west of our Homeland," Zelensky added.

The president also announced the start of construction of the Kremenchug Bridge, which will become one of 245 bridges, whose construction and renovation have been scheduled for this year.

In addition, Zelensky spoke about the start of a project to improve suburban passenger rail transportation. The first stage of the City Express project includes commute between Kyiv, Kharkiv, and Dnipro.

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The head of state promised to renew the rolling stock of the country's main railway company, Ukrzaliznytsia, engaging foreign investors.

"We are improving existing routes, Intercity train routes, and preparing new ones. Our goal is for passengers travel between cities to take three to four hours max," Zelensky said.

The head of state said a new airport was being designed, set to be located between Donetsk and Luhansk regions. According to him, the country will also build a new airport in Zakarpattia in the coming years.

Industrial output shrinking

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In the outgoing week, the State Statistics Service reported that industrial output in January fell by 4% against January 2020. At the same time, in December, there was an increase in production at the level of 4.8%.

Part of this drop is due to the lengthy New Year holidays and the introduction in January of a strict quarantine, which lasted for two weeks.

The State Statistics Service reports that in the processing industry in January this year, the drop in production on year was 6.5%, as well as 4.6% in the extractive industry. In the supply of electricity and gas, production rose 3.2% amid severe frosty days wrapping off the first month of the year.

At the same time, the annual decline in production of investment goods amounted to 19.4%, for consumer goods of short-term use it was 7.5%, and for intermediate goods it remained at the same level.

According to the State Statistics Service, the volume of capital investments in Ukraine as of the end of 2020 decreased by 38%, to a level slightly above UAH 400 billion.

A decrease in the inflow of funds in a year of a coronavirus pandemic was recorded in all industries. The largest outflow of investments was experienced by the arts, entertainment, and recreation industries – by 71%, education – by 46%, healthcare and social assistance – by 48%.

The drop in industrial investment stood at 44%, as well as 45% in agriculture, 40% in construction, and 43% in transport.

And one more negative trend – in the outgoing week, the Ministry of Finance announced an increase in the overall public debt in January by almost half a billion dollars, to more than $90 billion. In terms of national currency, the national debt increased by UAH 6.3 billion, to UAH 2.5 trillion.

Indexation of pensions

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Last week, the Cabinet adopted a resolution on the indexation of pensions by 11%, starting in March 2021.

"The size of pensions will increase by an average of UAH 308. The minimum increase is set at UAH 100," the government said.

In addition, the minimum pension payment will be up to UAH 2,200 for persons with a longer insurance period (30 years for women and 35 years for men).

The government noted that such an increase corresponds to half of the rise in consumer prices for the previous year and half of the increase in average wages.

Against the background of rising prices for goods and services, such an increase is seen as very modest, but at the same time it will come in handy for the elderly to help them pay bills.

Over the past week, gas suppliers offered households to buy gas in March at a price from UAH 6.70 to UAH 6.99 per cubic meter. It should be recalled that from February to March, the government will hold a cap on gas prices – no more than UAH 7 per cubic meter. Then, further into spring, another price hike is possible.

Despite the thaw that came to most regions of the country late winter, the energy grid was working at peak capacity.

According to the Energy Grid Operator, the state-owned Ukrenergo, the situation with coal reserves at TPP warehouses remains critical.

The first week of March will bring Ukrainians a real spring, new hopes, as well as new concerns. Huge snow piles that have accumulated throughout the long frosty winter and are now melting could lead to flooding of many settlements.

The Ministry of Health will expand the vaccination campaign for priority population groups, the Verkhovna Rada will return to the session hall, while farmers in the southern regions will begin their sowing campaign.

Anna Bredikhina

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