ANALYTICAL REPORT: by Oleg Ustenko, Julia Segura, Valentyn Povroznyuk, Edilberto L. Segura
SigmaBleyzer multinational private equity firm & The Bleyzer Foundation (TBF), Kyiv, Ukraine

Published by the U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wed, Dec 19, 2018 

WASHINGTON, D.C. - The "Ukraine Macroeconomic Situation – November 2018" analytical report with several charts and graphs IS ATTACHED to this communication and can be found at the link below.  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 long-time members of the U.S.-Ukraine Business Council (USUBC), http://www.USUBC.org. 

EXECUTIVE SUMMARY:  (entire November 2018 Macroeconomic Report Situation found in the attachment)

(1)  On 23 November, the Parliament approved the 2019 budget with a fiscal deficit of 2.3% of GDP, a critical step to allow Ukraine to receive USD 3.9 billion in IMF financing. This will help stabilize the economy in 2019.

(2)  On November 26, Verhovna Rada imposed Martial Law for 30 days in 10 oblasts bordering Russia, Transnistria, and the Azov Sea. This law was a reaction on the attack undertaken by Russian Federal Security Border agents against three Ukrainian military vessels approaching the Kerch Strait. The international reaction against Russian actions was fast and strong. 

(3)  Monthly data show that the economy continued to recover in October 2018. In fact, agriculture output increased by 28.5% yoy, following a rate of growth of 11.4% yoy in September.  Other sectors also performed well in October, with construction output increasing by 5.8% yoy, retail trade expanding by 5.0% yoy, and passenger transportation turnover expanding by 3.4% yoy. Ukrainian industrial production output also recovered in October 2018, with a growth rate of 1.4% yoy, following a decline of 1.3% yoy in September.

(4)  The consolidated fiscal budget was almost balanced in October. The state budget surplus of UAH 1.2 billion almost fully covered the deficit of local budgets of UAH 1.3 billion. The cumulative year-to-date consolidated budget balance remained positive and almost unchanged as compared to that in September at UAH 14.4 billion.

(5)  After three months of stability, consumer inflation accelerated in October. The all items index increased by 0.6 percentage points to 9.5% yoy on the back of production cost growth and expanding consumer demand.

(6)  In the banking sector, both deposits and lending activities continued to show improvements in October.  Hryvnia deposits expanded by 11.8% yoy, while Hryvnia loans increased by 12.8% yoy.  

(7)  In the second half of November, the exchange rate depreciated due to Russia's aggression in the Azov Sea. But the exchange rate returned to about 27.9 UAH/USD by mid-December.

(8)  In October 2018, the current account of the balance of payments had a deficit of USD 863 million, significantly lower than the deficit of USD 1.6 billion incurred in September 2018. Net financial inflows of USD 1.0 billion (principally from private sector operations) financed the entire CA deficit. International reserves amounted to USD 16.7 billion at the beginning of November. 

NOTE:  The entire Macroeconomic Situation Report for Ukraine for November 2018 can be found in the PDF Document:  Ukr-Monthly_Ec_Report_November_2018 Final.pdf