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Vitaly Shapran, the Chief Financial Analyst of Expert Rating Agency, member of the Executive Committee of the Ukrainian Organization of Financial Analysts
I think that 2018 will not be worse than 2017. This is confirmed by the forecasts of international organizations and the National Bank (NBU), but there is always a risk that something goes wrong, as it was in 1998 and 2008.
I think that one of the most serious and difficult challenges in 2018 is the outflow of labor resources to the EU countries. When the number of employed in the economy is decreasing, there is a risk of GDP decline and failing to meet budget.
The second challenge is a growth of imports and decline in the dynamics of export growth. January-September 2017 we ended up with a negative trade surplus of $ 196 million, but there is no guarantee that this almost zero indicator will be maintained in 2018, as it depends not only on us but also on the situation on our key commodity export markets.
Inflation will be higher than 10%, but less than in 2017. The main driver will be the administrative component, rising prices in neighboring countries and the growth of social payments, but the latter will have a limited impact on inflation.
Reforms on the recipes of our Western partners will be continued, as Ukraine has no will and resources to make this choice on its own.
Olexander Okhrymenko, the President of the Ukrainian Analytical Center
In 2018, it will be necessary to pay more foreign debts than in 2017. Ukraine will have to pay $ 4.3 billion state debt, while in 2017 this figure was $ 3.3 billion. In addition, it will be more difficult to place Eurobonds (Ukraine plans to raise $ 2 billion). If the US raises the base rate, which means that international investors will demand more interest on bonds of the developing countries, including Ukraine.
The rise in oil prices will lead to the fact that Ukraine will have to raise tariffs for utilities for both the population and for business. At the same time, the cost of energy resources will grow faster than the prices for grain and metal (the main Ukrainian export goods). Therefore, in 2018, the deficit in foreign trade may grow to $ 7 billion, and this will need to be covered by gold and foreign exchange reserves (at the end of November-2017 - $ 19 billion).
And of course, there are political risks. In 2019, Ukraine will hold presidential and parliamentary elections, and political cataclysms can only increase. And it will harm our economy!
Unfortunately, our authorities speak about reforms but do not implement them much. For example, they could improve the market for housing and utility service but two years have passed, and state officials have "frozen" this question. The same thing happened to a land reform and decentralization.
Ukraine's economy can grow only if it launches business lending. It is difficult, but it is necessary. This will give an impetus to GDP growth. It would be good if mortgage lending was also launched. This would also have a positive effect on the economy. And most important factor is hryvnia stability during the year. It can range from 26 to 27 UAH / 1 USD. Now the main goal of the country is not export, but development the domestic market, which requires lending, wage growth, and stability in the country.
There is a very high risk that in 2018 utilities will increase by 30-40% for the population and 50% for business, which will lead to an increase in all prices in the country.
Oleksiy Amfiteatrov, the director of IBI-Rating rating agency
The risks to the national currency may be aggravated by the persistence of the balance of current account deficit payments, fueled by the indefinite scenario of cooperation with the IMF and the European Commission. At the same time, according to the NBU, the repayment of state and guaranteed debt in 2018 is planned at the level of $ 7 billion.
In the foreign trade (including transit services), Ukraine’s attractiveness as a transit country is gradually decreasing. It is about the construction of by-pass gas pipelines and the development of new transit railways and auto-messages for the delivery of the EU goods through other countries - Poland, Belarus, Russia, which is related to the effect of mutual trade and transport prohibitions between Ukraine and the Russian Federation. The risks for domestic commodity producers have increased significantly with the entry into force of the non-political part of the Free Zone Agreement.
Many banks have not decided on a strategy for further development (this applies to Western financial groups), which significantly limits their credit activity. I admit that with further tightening of the monetary policy of the NBU, the liquidity deficit in the real sector will continue to be preserved with its simultaneous overabundance in low-risk instruments.
External disputes are important too. The nationalization of PrivatBank would have its judicial consequences. In 2018, this trend will intensify, as judicial decisions on the expired Eurobonds-2013 (considered in the High Court of London) and the transit dispute between Naftogaz and Gazprom (Stockholm Arbitration) to be made. The result of consideration of claims will affect not only the external liquidity of the state but also its reputation and investment attractiveness.
An important factor is the shortage of labor and its low productivity. The regulatory field in the sphere of labor relations does not correspond to realities. The leakage of human capital restrains the development of domestic production.
Donbas conflict will affect the economy in 2018 more than ever. Apparently, Ukraine (under the pressure of other countries) will have to recognize the social obligations to the inhabitants of the occupied territories. The costs of the restoration of the region will be substantial, and it is still unclear who will finance it.
In addition, we need to consider the instability of the operating environment. Legislation will change again; the result is unknown. As part of an agreement with the IMF, the EU and other organizations, Ukraine has undertaken a number of obligations - land, medical, pension reforms, financial sector reform, housing and communal services changes. Many "reforms" have not yet been implemented, some have already been adopted, but will only begin to operate from 2018 onwards.
The forecasts of international organizations, international rating agencies, and state bodies are hardly optimistic - all these organizations forecast a slight increase and focus on maintaining high risks.
Many reforms in Ukraine are carried out within the "critical need" - for the allocation of tranches and loans. The implementation of individual measures falls quite organically in the zone of interests of the government, domestic and foreign financial groups. Some aspects can infringe on someone's interests, so they will be realized only under donor pressure.
A certain increase in tariffs is quite possible, but the level of growth depends more on the attendant non-economic risks.
Dmytro Churin, the head of the analytical department of Eavex Capital investment company
Macroeconomic indicators for 2017 were in line with the expectations. It is important to understand that GDP growth of 2-2.5% this year is a very low indicator for our country, which is trying to overcome the protracted crisis.
Economic forecasts for 2018 at the moment remain very restrained, as the country's authorities refuse to implement a number of reforms, which has already led to the suspension of cooperation with the IMF. The importance of the IMF program is not only determined because of the money received from the fund but also by the indicator that the country is heading in the right direction. Now it is very difficult to attract strategic foreign investors to Ukraine, as they see that even the IMF is not ready to allocate new money transfers due to political processes that do not allow the country to fully develop.
On one hand, the government pledges GDP growth of 3% for 2018 with consumer inflation of 9%. This scenario looks relatively realistic. On the other hand, for the country's success, GDP growth of more than 4% per year is necessary. Such growth can only be achieved if foreign direct investment (FDI) is actively attracted. In 2017, a net inflow of FDI is estimated at approximately $ 2.5 billion, and it should be at least $ 5 billion. In 2005-2008, Ukraine attracted $ 8 billion in FDI per annum.
There is a lot of uncertainty regarding hryvnia exchange rate for 2018. The average rate set in the budget is 29.3 UAH / USD. cannot be considered a valid fact. In our opinion, the scenario is quite possible that the dollar rate will be kept below UAH 29 / USD.