WASHINGTON, D.C. - The "Ukraine Macroeconomic Situation – May 2017" analytical report is found below and as an attachment to this communication.  The monthly macroeconomic situation report is prepared by the SigmaBleyzer multinational private equity firm, www.SigmaBleyzer.com, and The Bleyzer Foundation (TBF), www.BleyzerFoundation.org, Kyiv, Ukraine, who are members of the U.S.-Ukraine Business Council (USUBC), http://www.USUBC.org. 

The complete Ukraine - Macroeconomic Situation - report for May  2017 in PDF format, with a series of important, color charts and graphs, can be found in the attachment to this posting. 

Executive Summary

  1. Russian-backed separatists in Eastern Ukraine continue to ignore the ceasefire agreed upon under Minsk-2.  Despite some decrease in the number of attacks, separatists continue to use prohibited heavy weapons.
  2. The main reform efforts are concentrated on fighting corruption. During the past month the General Prosecutor Office (GPO) continued investigations against the former head of the State Tax Agency. Successful anticorruption and anti-organized crime operations were also implemented against two dozen former high-ranking authorities.
  3. Following the approval by the EC of granting a visa-free regime to Ukrainians starting around June 11th, it is likely that the EU-Ukraine Association and Free Trade Agreements will be ratified by mid-July.  The Agreements should deepen cooperation and bring confidence to investors.
  4. On another positive note, a Swedish arbitration court ruled in favor of Naftogaz in its legal battle with Russia's Gazprom.  Naftogaz will not be required to pay Gazprom under their take-or-pay gas contracts and Gazprom’s ban on re-exports of gas was cancelled. Naftogaz may even receive reimbursements for Gazprom’s excessive gas prices.
  5. In the first quarter of 2017, economic recovery was slowed down to 2.4% yoy by tensions in Eastern Ukraine caused by a trade blockade with the areas of Donbass controlled by separatists.  Data for April shows that the most affected sector was industrial output, which declined by 6.1% yoy. On the other hand, other sectors showed positive growth in April: construction output (7.4% yoy), retail trade turnover (6.1% yoy) and agriculture (1.2% yoy).   
  6. State and local budget revenues grew significantly faster than expenditures in April. As a result, the consolidated fiscal budget surplus expanded to UAH 38.6 billion for the January-April period (or about 4.5% of period GDP).
  7. In April, consumer inflation decelerated by almost 3 percentage points to 12.2% yoy.  For the entire year, inflation is expected to be 10%.
  8. The UAH/USD exchange rate was on an appreciation trend in April, thanks to inflows of foreign currency from exporters and resumed cooperation with IMF and the EC. At the same time, the National Bank continuously purchased dollars on the interbank forex market to replenish the international reserves softening appreciation pressures. As a result, the exchange rate appreciated by less than 1% from 26.57 UAH/USD to 26.31 UAH/USD during the month. 
  9. In April 2017, Ukraine’s current account deficit declined to USD 146 million, compared to USD 732 million in March 2017.  The reduction of the current account deficit was mainly due to a large decline in the primary income deficit to USD 13 million, compared to USD 544 million in March 2017. This current account deficit was fully covered by net inflows in the financial account, which amounted to USD 1,116 million in April.  In addition, the country received the fourth tranche of the International Monetary Fund Program in April (amounting to USD 996 million).  These funds increased international reserves by USD 1,966 million, leading to international reserves of USD 17.2 billion.
     

    NOTE:  The complete May 2016 Ukraine - Macroeconomic Situation - analytical report, including several interesting and important color charts and graphs, can be found in the ATTACHMENT to this e-mail in a PDF format.   
    UKR_MONTHLY_EC_REPORT_MAY_2017_FINAL.PDF
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    NEWS: For the latest news about Ukraine go to the KYIV POST website: www.KyivPost.com.

    The Kyiv Post of the ISTIL Group is a member of the U.S.-Ukraine Business Council (USUBC).   
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    "A strong international voice for business in Ukraine for over 20 years"
    Washington, D.C., Morgan Williams, mwilliams@usubc.org; www.USUBC.org

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