Regional Economic Context and Economic Trends in Ukraine

Transcription

1 Regional Economic Context and Economic Trends in Ukraine Konstantine Kintsurashvili June 2017

2 ECONOMIC PROSPECTS: EBRD REGION 2

3 Growth in the EBRD region is to pick up in 2017 and 2018 In , EBRD region s growth is expected to gain pace but it will remain below the world average EEC Growth forecasted to increase in every sub-region, except Turkey Source: EBRD REP May

4 Outlook shaped by several developments Equity markets have performed strongly since the US elections on expectations of tax reform and deregulation and despite policy volatility in US The announcement of the US election results ushers a period of higher interest rates in the advanced economies, although monetary tightening is proceeding slower than previously anticipated Capital inflows into emerging markets despite fears of stronger dollar Net mutual fund flows to EBRD countries On balance, emerging markets have been enjoying improved external financing conditions even as 10-year US rates rose Source: EBRD REP May

5 ECONOMIC CONTEXT: EAST EUROPE AND THE CAUCASUS (EEC*) REGION * For the purposes of this presentation, the EEC region includes Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine 5

6 EEC economies lost growth momentum after the crisis Real GDP growth rates 18% 16% 14% 12% 1 8% 6% 4% 2% -2% (avg) (avg) 2017f 16.6% 11.2% % 5.9% 4.8% 4.4% 3.9% 3.4% % % % -0.5% -0.6% Georgia Moldova Armenia Ukraine Belarus Azerbaijan EEC region contracted by 1.7% in 2014 and by 4.8% in 2015, driven by contraction in Ukraine. In 2016, EEC posted 0 per cent growth*. The economies of Ukraine and Moldova recorded positive growth following recessions in 2015, GDP growth in Georgia remained flat, Armenia s growth slowed in 2016 to the lowest rate since 2009 and the economies of Azerbaijan and Belarus contracted. *Weighted average growth rates, based on the countries GDP in PPP US$ terms Sources: EBRD REP May 2017, IMF WEO April

7 Real GDP index [2008 = 100] All EEC economies except Ukraine have by now surpassed their pre-crisis output levels Post-crisis economic performance f 2018f Note: Dashed lines denote forecasts. Armenia Azerbaijan Belarus Georgia Moldova Ukraine Growth outlook: Small economic contractions in Azerbaijan and Belarus are expected to be outweighed by growth in the other economies of the region in 2017 All countries are forecast to grow in 2018 Outlook contingent on continued recovery in regional economic environment, a nonintensification of geopolitical tensions and other countryspecific factors. Sources: National Statistical Authorities, EBRD REP May

8 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 % of GDP Countries in the EEC impacted through investment, trade and remittances links with Russia Imports from Russia FDI from Russia Exports to Russia Exposure to Russia (2016) Remittances from Russia Russian economy contracted by 0.2% in 2016; 1.2% growth projected in 2017 Total exposure in 2014 Azerbaijan Georgia Ukraine Moldova Armenia Belarus Exchange rates against US$ Index [May 2012=100] Remittances from Russia to EEC and Central Asia 400 Exports of goods to Russia 12-month rolling sum [end-2009=100] 1500 Ukraine Moldova Belarus Armenia Azerbaijan Georgia (RHS) Last information available for February Sources: National Statistical Authorities and Central Banks, Russian Central Bank, IMF DOTS via CEIC, Thompson Reuters, EBRD calculations 8

9 US$ billions Months of import Currencies and international reserves have relatively stabilised Regional currencies vs US$ International Reserves 1 Armenia Georgia Moldova Russia Belarus Azerbaijan Ukraine 20 in $ bn, June 2014 in $ bn, May2017 in months of import, June 2014 in months of import, May Compression of imports contributes to import coverage ratios In , SOFAZ assets declined by ~11% from $37.1 bn to $33.1 bn Q Q June Georgia Armenia Ukraine Belarus Moldova Azerbaijan Azerbaijan data does not include SOFAZ assets. 0 Sources: National Central Banks, SOFAZ 9

10 Inflationary pressures in the EEC economies have eased on the back of exchange rate stabilization and generally tight macroeconomic policies Consumer price index Year-on-year change EEC Note: Latest month denotes March 2017 in most countries. Source: National Authorities via CEIC 10

11 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Nominal currency depreciations influenced the real effective exchange rates (REER) dynamics (with other factors being e.g. domestic inflation and structure of trade). 140 Change in Real Effective Exchange Rate Index January March 2017 (Jan 2014=100, increase means appreciation) 130 ARMENIA 120 AZERBAIJAN 110 MOLDOVA UKRAINE 80 RUSSIA 70 GEORGIA BELARUS Sources: National Central Banks and CEIC 11

12 Economic vulnerabilities in the EEC countries are primarily related to external imbalances, leverage and exposure to f/x risks Banking sector loans, % of GDP (2016) Public debt, % of GDP (2016) Share of l/c loans Share of f/x loans 25.8% 27.2% Down from 64% in 2014, on the back of bank closures and deleveraging % 48.1% 55.7% Domestic public debt Foreign public debt 37.4% 38.1% 44.6% 51.8% 53.9% 81.2% Moldova Azerbaijan Belarus Ukraine Armenia Georgia Azerbaijan Moldova Georgia Armenia Belarus Ukraine 15% 1 5% -5% -1-15% Current account balance, % of GDP % -3.6% -3.6% -4.1% -4.1% -13.3% In 2013 Armenia Azerbaijan Belarus Ukraine Moldova Georgia External debt, % of GDP % 81.9% 87.1% 90.5% 97.4% 123.8% Azerbaijan Belarus Georgia Armenia Moldova Ukraine Sources: National Central Banks, National Statistical Authorities, CEIC and IMF WEO (April 2017) 12

13 ECONOMIC TRENDS IN UKRAINE 13

14 f 2018f Indices (yoy change) US$ billions Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Economic stabilisation and rebound after two years of negative growth $200 Recovery is underway after 16% cumulative contraction in Nominal GDP, bn US$ (LHS) 7.4% 7.6% Real GDP Growth (RHS) 1 1 5% Output stabilisation from H Real growth, y/y q/q, sa 4.8% 1.5% 2.3% 2.4% 0.1% $180 $160 $140 $ % 5.2% 4.1% 0.3% % 2. 5% -5% -1-15% % -14.5% % $100-5% $80 $60 $40 $ % -6.6% -9.8% -1-15% In Q1 2017, industrial production slowed but other economic indicators remained positive $ *EBRD Regional Economic Prospects May Q Capital investment Construction Turnover of retail trade Industrial production Sources: State Statistics Service of Ukraine, National Bank of Ukraine, EBRD REP May 2017, EBRD estimations 14

15 In US$ billions Per cent of GDP FDI and exports diversification are key to attaining faster growth Recovery in consumption and capital investment is partly offset by the fall in net exports (2016, real growth, y-o-y) -5% 5% 1 15% 2 Household consumption Government consumption Gross fixed capital formation Exports 1.8%, US$ 60.1 bn 0., US$ 18 bn 20.1%, US$ 14.1 bn -1.6%, US$ 45.9 bn Imports 8.4%, US$ 51.7 bn Significant potential to attract more FDI (in US$ terms) and diversify exports Composition of export of goods, % 5.8% % Ukraine Georgia Ukraine Georgia 14% 12% 1 8% 6% 4% 2% Other exports Agriculture, metals and minerals FDI inflows in US$ bn (LHS) FDI inflows as % of GDP (RHS) Sources: State Statistics Service of Ukraine, National Bank of Ukraine, National Statistics Office of Georgia 15

16 Jul Nov Feb Mar Aug Sep Oct Dec Jan Mar Apr May Jun Jul Sep Oct April May Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Inflation and foreign exchange pressures have abated Hryvnia adjusted and relatively stabilised PrivatBank declared insolvent and nationalised 30 Official USD/UAH 35 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Apr-17 16% 14% 12% 1 8% 6% 4% 2% -2% Inflation declined on the back of exchange rate stabilization and prudent fiscal and monetary policies CPI, m/m (LHS) CPI, y/y (RHS) 12.2% Gradual relaxation of the monetary policy 3 Growth in real wages resumed NBU policy rate, % p.a % Sources: National Bank of Ukraine, State Statistics Service of Ukraine 16

17 Balance of payments is supported by inflows of official assistance; f/x reserves increased and now cover 3.9 months of imports Balance of payments In US$ billion (+inflows, -outflows) Private sector inflows resumed in 2016 Net capital flows in US$ billions (+net inflow, -net outflow) Current account Financial account (excl. reserves and IMF financing) Overall balance of payments (excl. reserves and IMF financing) m Non-bank private sector Banks Public sector (general gov't and monetary auth.), including IMF m Official reserve assets increased from 1 month of import coverage in February 2015 to 4 months in May 2017, thanks to external aid 2.5 in $ bn 1.0 in months of imports Dec-13 Feb-15 Dec-15 May Aid dependency declined but remains significant In US$ billions 13.4 Reserves in Jan-2016 Down from net US$ 8.2 bn in International aid (IMF+US) 1.3 Net domestic f/x borrowings 1.6 NBU f/x purchases -1.3 NBU repayments (swap lines) -1.5 F/X debt service payments 15.5 Reserves in Dec-2016 Sources: National Bank of Ukraine, Dragon Capital 17

18 US$ billions US$ billions Public debt-to-gdp ratio increased, although the debt operation made the amortization path until 2019 very affordable Public debt/gdp ratio increased due to exchange rate effects, the economic contraction and inflows of official loans 2 (~US$3bn) haircut under the debt operation contributed to the reduction of public sector commercial debt Restructuring of sovereign bonds helps with the public debt amortization path No principal Eurobond payments until Private sector, f/x debt Public sector, commercial debt Public sector, official debt Public debt, % of GDP (RHS) Public and private f/x debt, % of GDP (RHS) Sources: Ministry of Finance of Ukraine, National Bank of Ukraine, IMF Second Review Staff Report (September 2016), EBRD estimations 18

19 Thank you 19