Economic trends of Ukraine

Economic trends of Ukraine

Fueled by private consumption and gross fixed capital formation, real GDP growth in 2018 was +3.6%, higher than IMF forecast of +3.2%. Official salaries per person in Ukraine increased by 55% in USD equivalent over the past three years (+USD 104.1) and do not include +30%-40% of “backdoor salary.” In the absence of increases in energy tariffs, rapidly rising wages (the minimum wage was doubled in 2017), and slowing inflation will support household spending; investment will remain robust. With a new IMF deal now approved, economic growth will remain at around 3% in 2019-2021.

The National Bank of Ukraine (NBU) has forecast a decline in inflation to 6.3% in 2019 and a further fall to 5.8% in 2020. NBU officials attribute this downward trend to tight monetary conditions and restrained fiscal policies. The rate of inflation was 9.8% in 2018, the best indicator for the past five years following a sharp rise in 2014-15. As inflation drops, Ukraine’s GDP remains on a steady growth trajectory.

© 2019 DUCAT

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Ukrainian currency has stabilized

Ukrainian currency has stabilized

Following the devaluation of Ukrainian hryvna in 2013-2015 as a consequence of the Revolution of Dignity, the National Bank of Ukraine has implemented a number of currency stabilizing measures. This includes the requirement for the mandatory sale of 50% of the total sum of foreign currency proceeds from abroad by legal entities and entrepreneurs.

These measures have stabilized the currency, setting it at 26-27 UAH per USD with insignificant fluctuations. Despite continued worries about fluctuations, currently the exchange rate remains close to where it was at the start of 2018. It is helpful to keep in mind that historically speaking, Kyiv real estate prices decrease on a percentage basis far less than the hryvnia during a devaluation. For example, a 20% currency devaluation can translate into a 5% drop in real estate prices. Therefore, if the hryvnia devalues by less than 10%, no significant impact on real estate prices is expected.

© 2019 DUCAT

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