Ukraine

RGE's Q1 2010 Ukraine Outlook

After a sharp double-digit growth contraction in 2009, stemming from the collapse of industrial output, RGE believes that Ukraine will experience only a modest recovery in 2010. Struggles to meet debt payments—including more costly energy, weak private consumption and a limited revival in global steel demand—suggest that the economy could be slow to grow again despite a stabilization of the manufacturing sector. With credit growth constrained, growth will rely on domestic, not external, demand.   Positive base effects, especially in H1 2010, and a partial rebuilding of inventories should be a source of support but political wrangling could cloud stem the recovery and limit Ukraine’s access to public and private capital. RGE fears that Ukrainian leaders will be slow to set economic policy priorities needed to restart the frozen IMF loans, as coalition building may be difficult even after the second round of presidential elections in February. A continued delay in the disbursement of the frozen IMF and other multilateral funds would be a major risk—and despite the improvement in economic conditions, the risk of default is non-negligible.

Industrial production has been improving in H2 2009 as rising steel prices and global sentiment provided a boost. After contracting almost...

Read the Q1 2010 Ukraine Outlook.