Intellinews - Ukraine Financial Sector Report

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The IMF expects Ukraine’s economic growth to slow from 5% in 2011 to 3% y/y in 2012, the fund said in its latest World Economic Outlook, keeping unchanged the forecast from the previous edition of the report. In 2013, the GDP growth is expected to reach 3.5%. The global economic slowdown has a great impact on the Ukrainian economy as one of the CIS energy importing economies, the IMF noted. Moreover, the IMF warns about the risks in case of the euro zone debt crisis deepens. For the energy importers in the region, direct trade spillovers from a further escalation of the euro area crisis would also be sizable given that Europe is the most important trading partner outside the region. If downside risks materialise, external balances would deteriorate, which would tend to exacerbate capital outflows and put pressure on currencies, especially in energy importers with large external financing needs (such as Ukraine), the fund said. http://www.bharatbook.com/finance-market-research-reports/intellinews-ukraine-financial-sector-report.html

Rating agency Fitch believes that the local currency hryvnia may fall 10% by the end ...
... of the year because of “fairly weak” confidence in the currency. A slight devaluation and moving to more flexible exchange rate would benefit the country, the agency noted. At the same time, officials, including PM Mykola Azarov keep on promising that the hryvnia will remain stable and that there are no economic preconditions for devaluation. The hryvnia, which has declined 1.2% against the dollar this year, devalued by almost 35% in Q4 2008. Financial Sector Report

We believe that Ukraine will have to devalue the national currency in the next few months in order to support the competitiveness of exports and prevent the growth of foreign trade deficit. If the economic situation changes to the worse, the fall in the central bank’s reserves may reach critical level, when the devaluation will be inevitable.

Executive Summary
Sector overview
PM: GDP growth slows to 1.5% y/y in Jan-Aug
Fitch Ratings sees GDP growth slowing to 0.5% in 2012.
EBRD keeps GDP growth forecast for 2012 at January’s level of 2.5%.
World Bank worsens GDP growth forecast for 2012
IMF maintains its GDP growth forecast
R&I affirms Ukraine's B+ rating
Industrial production declines by 4.7% y/y in August
S&P expects NBU’s reserves to decline in 2012.
Fitch expects national currency to devalue
FinMin forecasts average annual hryvnia exchange rate at 8.4 UAH/USD in 2013
FDI up 15.6% y/y in H1
Foreign debt down 0.4% m/m to USD 24.7bn in August
Government pledges to keep state debt at 36% in 2012
Banking
Moody’s keeps negative outlook on domestic banking system
NBU forecasts increase in banks’ liquidity
Monetary overview

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