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Economic forecast for Ukraine: Hryvnia weakening, high inflation and tarrifs

Author : Olexandr Honcharov

11:11, 27 November 2017
Economic forecast for Ukraine: Hryvnia weakening, high inflation and tarrifs

Author : Olexandr Honcharov

IMF refused to provide the next tranche in the amount of $ 1.9 billion until the spring of 2018

11:11, 27 November 2017

Read the original text at 112.ua.

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Many economic experts and analysts do not select chary expressions anymore and call a pikestaff a pikestaff. This is obvious, because the negative balance, like a vacuum cleaner, sucks out the currency from the economy and pushes the rate of the hryvnia. And to keep the situation, we need new loans from the International Monetary Fund, which are not yet available.

Related: Four years after Maidan: What happened to the Ukrainian economy

The main thing is not to repeat earlier mistakes and miscalculations. In this connection, it is not superfluous to recall the following fact. As you know, we have closed more than 90 commercial banks. So, depositors who had deposits in foreign currency, suffered from this twice. Firstly, banks did not return the currency with interest to them, and then the Individual Deposits Guarantee Fund returned the funds in hryvnia at a bad exchange rate.

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Now the National Bank sets the rate of foreign currencies for the next day every evening. However, in the period from April 4, 2014 until March 30, 2015, it calculated the rate in the middle of the day. Therefore, there were two different exchange rates during the day, namely: before and after 2 PM. This example is very instructive and makes the financial authorities to be particularly cautious and balanced in making decisions. Especially in these days, when the IMF became another horror story to us. Analysts of the Fund have worsened the inflation forecast for Ukraine until the end of 2017, namely: inflation will be 12.8%. And the inflation forecast for 2018 deteriorated by 0.4 percentage points - to 10%, respectively, the national debt to GDP in 2017 will reach 86.2%, and in 2018 - 83.5%.

This means that by giving money to a bank deposit, you will inevitably lose more than 10% per year. For 10 years, you lose the cost of this original amount.

Yes, the problems are not simple, you must first be able to correctly consider and professionally assess risks and macroeconomic indicators. And, of course, meet the IMF's demands to keep the state budget deficit at agreed levels. This is especially important now, because earlier in the last 10-15 years the tandem "financial and economic block of the Cabinet of Ministers - state banks" always needed a budget deficit to implement corruption schemes.

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The scheme is primitive, but sophisticated: the "pocket" commercial banks and state-owned banks purchased loan bonds, issued by domestic government, and later they received a high guaranteed income. But such schema could successfully function only in terms of a state budget deficit. Budget deficit in 2013 was 4.5%. The deficit of the state budget for 2018 is planned at the level of 2.4% of GDP, or 3 billion USD. While the current officials lag behind the predecessors.

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However, in the end of 2017 industrial production for 9 months decreased by 0.3%, and the agrarian sector decreased by 0.7%. But the most alarming is that for 8 months of this year, the scale of imports has increased by 27.4%, that is, we buy more from abroad than we produce at home. Therefore, a more powerful round of inflation and devaluation of hryvnia might begin. Do not do obvious stupid things. For example, the Cabinet greatly increases tax rates and excise, and then Prime Minister Groysman will try to subsidize the same rates with the same money. The experts constantly repeat it to him, but he does not care.

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In conclusion, let us make a short-term forecast. So, the autumn months are traditionally “unhappy” for the Ukrainian economy. The state budget and resources are running low, customs revenues from exports are falling too. The International Monetary Fund refused to provide the next tranche in the amount of $ 1.9 billion until the spring of 2018. And one must be prepared to weaken hryvnia exchange rate, increase inflation and tariffs of the monopolies. But the worst thing is that the same people who have driven us into this difficult situation have been trying to "disintegrate" this situation.

Related: Unbiased view on economy of Ukraine: Nine months of 2017

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