Monthly Economic Monitor Ukraine, 2002

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Monthly Economic Monitor Ukraine
No. 26
December, 2002

• A new Cabinet of Ministers, headed by Viktor Janukovich, the former governor of Donetsk Oblast, was formed.

• In response to threatened sanctions from the FATF, Ukraine adopted a law on the prevention of money laundering.

• The Ministry of Economy reduced its forecast for the yearly real GDP growth to 4.5-4.8% in 2002.

• A law introducing export tariffs on scrap metal was passed.

• Parliament passed an unrealistic budget in second reading.

• The Verkhovna Rada allowed the Government to exceed the marginal limit of internal debt for 2002.

• The NBU supported two innovative investment projects.

• Ukraine placed an additional eurobond tranche of USD 260 m.

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Monthly Economic Monitor Ukraine
No. 25
November, 2002

• Naftogaz (Ukraine) and Gazprom (Russia) signed an agreement setting up the International Consortium on Management and Development of Ukraine’s Gas Transit System.

• President Leonid Kuchma has not been invited to participate in the Ukraine-NATO meeting.

• Leading Ukrainian journalists protest against censorship at television and print mass media outlets.

• The real GDP grew by 4.1% yoy from January to September 2002.

• More rights were granted to potential buyers of strategic state enterprises.

• Cancellation by Russia of the import tariff on the Ukrainian tubes should partially resolve trade tensions between both countries.

• Parliament passed the first draft of Budget 2003 with suggestion to increase planned budget revenues by UAH 8 bn.

• JPMorgan lowered its outlook on Ukrainian eurobonds.

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Monthly Economic Monitor Ukraine
No. 24
October, 2002

• Opposition protests took place in Kyiv and throughout the country calling on President Leonid Kuchma to resign.

• The U.S. announced that evidence according to which President Kuchma had permitted weapons exports to Iraq is authentic, and froze USD 54 m of aid to the Ukrainian central government.

• The real GDP growth is not likely to reach its 6.0% target in 2002.

• A new privatisation program for 2003-2008 has been drafted.

• The government introduced the Budget 2003 draft to Parliament.

• The Council of the NBU adopted “General Principles of Monetary Policy for 2003”.

• Starting in October 2002 the State Pension Fund account will be gradually transferred to Oschadbank.

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Monthly Economic Monitor Ukraine
No. 23
September, 2002

• President Leonid Kuchma admitted that Ukraine’s political system needs to convert from the present presidential-parliamentary republic to parliamentary-presidential one.

• The IMF announced that the last tranche of the Extended Fund Facility Program, ending on September 3, 2002, will not be disbursed due to fiscal problems.

• The privatisation of Ukrtelecom was postponed until 2003.

• The Cabinet of Ministers approved conditions of selling stakes in nine regional energy distribution companies (oblenergos), but unsolved issues with oblenergo debts hinder their privatisation.

• The Ministry of Finance introduced a temporary UAH 2 bn budget expenditures cut for August and September.

• The new NBU decree on long-term refinancing of commercial banks for investment projects crediting endangers monetary stability in the country and could intensify "rent seeking" activities.

• ·Restructuring of the privately held external debt is to be finished with the issue of USD 250 m eurobonds due in 2007.

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Monthly Economic Monitor Ukraine
No. 22
August, 2002

• Svyatoslav Piskun, the former Deputy Head of the State Tax Administration was appointed as the new chief public prosecutor.

• The Ministry of Economy and European Integration revised the GDP forecast for 2002. If previously the Ministry anticipated a 6.0% growth, two scenarios are now proposed.

• The President of Ukraine signed the law “On Grain and the Grain Market in Ukraine” envisaging state regulation of this market.

• Ukraine introduced several new anti-dumping rules and special measures against imports from Russia.

• During the first half of 2002 tax arrears (VAT and enterprise profit tax non-payments mainly) increased by more than 50%.

• The NBU increased the period for commercial bank refinancing and lowered the discount and reserve requirement rates.

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No. 21
July, 2002

• The new Verkhovna Rada has set up 24 committees and one special control commission.

• The real GDP grew by a modest 3.8% yoy between January and May 2002, compared to 9.0% yoy in the respective period of the previous year.

• Ukraine, Russia, and Germany intend to form a gas transit consortium.

• During the first four months of 2002, exports to Asian countries increased by 35.2%, partially compensating the 30.8% decrease in exports to Russia.

• The significant consolidated fiscal surplus, accumulated during the first four months of 2002, is attributed to lower than planned expenditures by the central government.

• Negative expectations concerning all emerging markets depressed the prices for Ukrainian eurobonds. By the end of June they had recovered, however.

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No. 20
June, 2002

• Volodymyr Lytvyn, a leader of the bloc "For United Ukraine" and former Head of the President's Administration, became the new speaker of Parliament.

• Ukraine received the status of observer in the Eurasian Economic Community (EURASEC).

• Investments in fixed capital decelerated to 9.6% yoy in the first quarter of 2002 compared to 23.7% yoy during the same period of 2001.

• The Cabinet of Ministers finally approved the privatisation terms for Ukrtelecom.

• In May 2002, the month-on-month change of the consumer price index was negative, resulting in a new slowdown in inflation to the 1.4% yoy level.

• The Cabinet of Ministers approved the criteria for determining suspicious financial transactions, which commercial banks must report to the authorities.

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No. 19
May, 2002

• Although the recent elections have not established a clear majority in the new Parliament so far, some top positions in the Cabinet of Ministers have already changed.

• The Cabinet of Ministers continued signing coordination memorandums with large players of the national economy. In April such memorandums were signed with the ore-mining and metallurgical sector and with producers of fertiliser.

• EU protectionism, as well as anticipated good grain harvests both in Ukraine and Russia will likely reduce grain prices on the domestic market.

• The current account for 2001 has maintained the upward trend for the third year, reaching a surplus of USD 1.4 bn.

• The NBU further decreased both the discount rate and the reserve requirements, yet high lending rates persist.

• Ukraine's security market adopted international codes for securities and abolished trading in promissory notes.

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No. 18
April, 2002

• Six political blocks and parties will make up the political structure of the newly elected Verkhovna Rada.

• The performance of the manufacturing sector improved in February, although metallurgy continued to decline.

• The government intends to introduce new grain and sugar market regulations reflecting the interests of the large markets players.

• The merchandise trade decelerated in January 2002, yet the trade surplus has doubled year-over-year.

• The consolidated fiscal surplus for the first two months of 2002 facilitated the timely servicing of Ukraine's Eurobond obligations.

• Administrative controls applied during the pre-election period contributed to a further price level decrease for consumer goods. The inflation in March was at a 2.2% yoy level.

• The NBU liberalised some foreign exchange market regulations.

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No. 17
March, 2002

• The Government and the IMF did not reach an agreement on resolving the VAT refund problem, which postpones disbursement of the next IMF tranche to Ukraine.

• The President did not sign the Civil and Commercial Codes and returned them to Parliament.

• Due to slowdowns in industrial production and construction, the real GDP grew by 3.2% in January 2002 compared to 9.1% growth in January of the previous year.

• A tender for sale of 37% of the Ukrtelecom stock, designated to strategic foreign investor, might be scheduled for October 2002.

• Within the framework of the WTO accession process, Ukraine signed bilateral protocols on access to the markets of goods and services with Canada and Republic of Korea.

• The NBU decreased the reserve requirements rates for deposits in national currency.

• The NBU allowed Ukrainian banks that meet certain requirements to open branches abroad and eased the establishment of new banks.

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No. 16
February, 2002

• The Law on the Cabinet of Ministers was adopted by Parliament.

• Although Parliament passed a law on laser disks market regulation, the USA introduced trade sanctions against Ukraine.

• The IMF postponed the decision to disburse the next EFF tranche until spring.

• The real GDP grew by 9% yoy in 2001 supported by increases in domestic consumption and investments.

• The consolidated fiscal deficit in 2001 amounted to 0.5% of GDP.

• Total credits to the economy increased by 46% yoy in 2001.

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No. 15
January, 2002

• Parliament passed the Law on the budget for 2002 with a UAH 4.3 bn deficit. Privatisation receipts were not included.

• Ihor Yushko became the new Minister of Finance.

• Ukraine and Russia signed a joint protocol applying to gas transit and supply in 2002.

• The USA introduced trade sanctions against Ukraine following Parliament's failure to regulate the laser disk market.

• The Inflation rate in 2001 was at 6.1%.

• The Ministry of Finance reduced the interest rate for inflation-linked state domestic bonds to 5.18% p.a. for 2002.

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