Fast Market Research recommends "Ukraine Business Forecast Report Q1 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 02/06/2013 -- Core Views:
In line with our view for a sharp slowdown in growth, Ukraine contracted in by 1.3% in Q311. We expect real GDP to contract by just -0.1% and expand by 1.0% in 2012 and 2013 respectively.
We maintain our expectations for growing external account imbalances to drive a devaluation of the hryvnia.
We see political risks as likely to grow over the next 12 months. The imprisonment of former prime minister Yulia Tymoshenko has severely soured relations with the EU, while bilateral relations with Russia remain tense over the issue of Ukraine's gas imports.
Major Forecast Changes:
Recent economic indicator readings suggest a more aggressive economic slowdown earlier than we anticipated. We have long-held a negative outlook for Ukrainian economic activity, on our negative outlook for global metallurgical markets, a hryvnia devaluation and a weaker external demand. As a result, we have downgraded our real GDP growth forecasts to -0.1% and 1.0% in 2012 and 2013 respectively, from previous forecasts of 2.0% and 0.9%.
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We retain our negative outlook on Ukraine's fiscal deficit, which we now expect to arrive at 4.9% of GDP in 2012 and 4.6% of GDP in 2013. Expensive debt servicing costs, expansionary social spending policies coupled with over-optimistic official growth forecasts underpin our cautious stance towards Ukraine's fiscal outlook.
Key Risks To Outlook:
A sharper than expected devaluation could trigger major shockwaves through the domestic economy, particularly within the financial sector, which has barely recovered from the 2008 devaluation. Existing capital buffers may prove insufficient to deal with a devaluation of 20% magnitude or greater.
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