- Ukraine Cut Off: No International Flights or Trains for 2 Weeks
- Cuts Designed to Keep Coronavirus Out, Trade Open
- PM Asks Ukrainians to Stop Traveling Domestically
- Ze Asks Employers to Allow Work From Home
Starting from Monday, foreigners without residency permits are barred from entering Ukraine. Starting from Monday, all international flights, trains, and buses to and from Ukraine are suspended for two weeks. All train service stops between Ukraine and Poland, Moldova, Russia and Slovakia. Airports will only be open for cargo flights. The measures are designed to block, or at least slow, the entry of coronavirus from the EU, officially named by the World Health Organization as a hub of the global pandemic.
Almost half of Ukraine’s 230 border crossings are closed through Friday, April 3, Serhii Deineko, head of the State Border Guard Service told reporters on Saturday. The 107 that will remain open have largely been selected to keep Ukraine exports and imports moving.
“Cargo checkpoints – air, railway, sea and automobile – will continue to operate,” President Zelenskiy said in video address Friday night. “Crews of ships, airplanes, trucks can enter Ukraine and are obliged to undergo medical verification with rapid tests.”
This means Polish truck drivers can drive into Ukraine. Poland is Ukraine’s third largest trading partner, after China and Russia. In one sign of cargo disruptions, Ukrainian trucks traveling from Italy are stopped on Slovenia’s western border, reports Ukraine’s Infrastructure Minister. Similarly, trucks traveling from Italy to Croatia or Hungary are not allowed to drive out of Slovenia.
Maxim Nefyodov, head of the State Customs Service, clarified on Facebook: “All major [Ukrainian] checkpoints will operate, including major airports, ports, landing points. The restrictions will apply to certain local checkpoints, pedestrian crossings, low-load railway crossings.”
In a next step, Prime Minister Shmygal asks Ukrainians to stop traveling within Ukraine as a measure to stop the spread of coronavirus. “I also ask you, very insistently…to stop travelling between the cities of Ukraine,” he said in a video address posted Saturday night on his Facebook page after an emergency meeting of the Cabinet of Ministers.
This week’s air travel bans will brake Ukraine’s double digit air passenger growth. In the first two months of this year, the flow of air passengers using Ukrainian airports was up 15% y-o-y, to 3.2 million. The State Aviation Service reports that last year, air passenger growth was up 18.5% y-o-y, to 24.3 million.
At checkpoints on the line of control with Russia-controlled Donbas, only Ukrainians registered as living in Kyiv-controlled Ukraine, will be allowed to cross. Ukraine’s Interior Minister Arsen Avakov said Friday: “We now have preliminary information about 12 cases of coronavirus in Horlivka.” Horlivka is in the separatist section of Donetsk Region.
After a 71-year-old woman returning from Poland died Friday in Radomyshl, Zhytomyr Oblast, authorities placed the entire city 110 km west of Kyiv under lockdown. In response to Ukraine’s first coronavirus fatality, authorities closed markets, stopped bus service, and started checking everyone driving in or out of the city of 15,000.
With 40% of Ukraine’s migrant workers going to Poland, the suspension of flights and trains will cause problems for many, including involuntary overstays of the 90-visa free Schengen limit. If borders are not fully reopened, farms in Poland and Lithuania will lose Ukrainian migrant workers crucial for cultivation and harvests, reports the Kyiv Post in a survey story. The National Bank of Ukraine predicts that labor remittances will decrease slightly from the current level of $1 billion a month.
Preparing for a possible Italy-size epidemic, Zelenskiy said that 2,000 infectious disease physicians and 5,000 nurses are ready to staff designated hospitals with a total of 12,000 beds. For a nation of 37 million people, he said the government is preparing this week 200,000 rapid tests and 10 million masks.
Turning to employers, the President appealed: “I personally ask business executives – if possible, allow your employees to work at home, remotely. Especially those who have children and who cannot leave them because of quarantine at schools and kindergartens.”
Companies are moving fast to protect employees and work flows from coronavirus, according to an American Chamber of Commerce in Ukraine and Deloitte survey last week of 111 member companies. Measures taken are: limiting business travel – 81%; providing remote work opportunities — 79%; providing employees with up-to-date information –74%; and office security — 74%. Asked about adjusting their 2020 business targets, 65% responded that they plan to maintain their targets, while 14% plan to moderately lower their targets.
The coronavirus disruption of China’s role in global supply lines offers opportunities for Ukrainian companies to supply components and semi-finished products to EU manufacturers, argues Hennadiy Chizhikov, president of the Ukrainian Chamber of Commerce and Industry. “The spread of coronavirus can cause large-scale changes in the distribution of production and the creation of new production chains,” Chizikov said Friday at a business forum in Lviv. He said some EU companies are studying transferring orders for components to suppliers in Poland, Romania, Slovakia, and Turkey.
The National Bank of Ukraine sold almost $1 billion dollars last week in moves that contained the hryvnia devaluation against the dollar to 4% for the week. Demand tapered Friday, hitting $141.6 million. After the banking holiday on Monday, the central bank sold $270 million on Tuesday. On Wednesday, sales rose to $350 million. On Thursday, sales started to fall, hitting $220 million.
S&P joins Fitch Ratings in maintaining their rating of Ukraine’s long-term foreign currency debt rating at ‘B.’ Fitch reaffirmed its ratings March 7. S&P followed last Friday. Moody’s rating is Caa1, outlook positive.
- Prime Interest Rate Cut to 10% – Lowest in Six Years
- Demand for Dollars Eases
- To Push Russian Oil Out of Europe, Saudis Offer Radical Price Cuts
- Ukraine’s Oil Bill Drops
- Coronavirus Cuts More Ukraine Flights
- Tired of Laundering Money, Central Bank Says Corona Will Promote Cashless
Effective 13th of March, Ukraine’s prime rate is 10%, the lowest since the war with Russia started six years ago. In the latest of an 8-month series of six cuts, the National Bank of Ukraine Board lowered the key rate by one percentage point, from 11%. With annual inflation at 2.4% in February, the bank is sticking with its goal of cutting the prime rate to 7% by the end of this year. The Bank said: “The Board of the National Bank made a decision on the discount rate in conditions when inflationary pressure is weakening faster than expected, and the economy requires further support.”
The interest cuts come as collapsing Western markets and dropping investor confidence batter Ukraine’s key financial indicators. Today, the official hryvnia/dollar exchange rate is 25.86 – an 8% devaluation in 10 weeks and a return to levels of last July. Over the last three weeks, the yield on Ukraine’s 2028 dollar bond has jumped more than five percentage points, to 11.1%. GDP-linked warrants have fallen from a nominal value of $1.07 in late February to 60 cents today.
A deal with the IMF would help calm markets, Smoliy said. He said: “The conclusion of a new program with the IMF will reduce the vulnerability of the Ukrainian economy during turbulence in world markets at the time of peak payments on public debt.” Separately, Ihor Umansky, the new Finance Minister, said Thursday the government believes a deal with the IMF can be in place by May.
In Washington, IMF spokesman Gerry Rice said at his scheduled press briefing: “A new government was appointed last week in Ukraine, signaling that it wants to continue working closely with the IMF, including on the Fund support program…We are ready to fully support Ukraine’s reform efforts as well as policies aimed at achieving these goals.”
Demand for dollars eased yesterday, as the central bank sold only $76 million of $200 million put up for auction. Monday was a banking holiday. On Tuesday, the National Bank of Ukraine sold $270 million. On Wednesday, it sold $350 million. “This week alone, the National Bank net sales of foreign currency reached $700 million,” Yakiv Smolii, bank governor, told reporters Thursday. He said most sales were to Ukrainian companies. Demand from foreigners selling government hryvnia bonds was not significant. Oleg Churiy, a deputy governor, said: “There are no plans to introduce currency restrictions – we have sufficient foreign exchange reserves to smooth out currency fluctuations.”
Saudi Arabia is offering radical oil price discounts in a drive “to push out” Russian oil from Europe, Bloomberg reports in a story headlined: ‘Flood of $25-a-Barrel Saudi Arabian Oil Is Headed for Europe.’ On Tuesday, Saudi Arabia announced that it would raise production in April by 25% over February’s level. To sell the oil, state-owned Aramco offers allocations from 25% to 200% to a host of European refiners: Royal Dutch Shell Plc, BP Plc, Total SA, OMV AG, Repsol SA and Cepsa SA. To ensure fast delivery, Aramco has stocks in Rotterdam, for northwest Europe, and near Alexandria, Egypt, for the Mediterranean.
A test load of Azeri oil is traveling by Ukrainian pipeline north from Odesa, bound for Belarus, Alexander Tishchenko, Belneftekhim spokesman, tells Interfax-West. The shipment of 90,000 tons comes after Belarus and Russia tangled last month over oil prices. SOCAR, the State Oil Company of Azerbaijan, has agreed to supply 250,000 tons of oil to the Mazyr Oil Refinery in southern Belarus. From Odesa, the oil moves up Ukraine’s pipeline to Brody, Ukraine, then is shunted east, on the Druzhba pipeline, to Mazyr.
Even before this week’s 35% drop in the price of Brent oil, to $32.70 a barrel, Ukraine’s oil import bill dropped by 11% in January-February y-o-y. In the first two months of this year, Ukraine imported $681 million worth of oil products, reports the State Customs Service. Last year, Ukraine spent $5.3 billion on oil imports, a 7% drop from 2018. Last year, the top three suppliers of oil products to Ukraine were: Russia – $262 million (38.5%); Belarus – $228.5 million (33.5%); and Lithuania – $103 million dollars (15%).
In January-February, Gazprom sent 6.5 billion cubic meters of Russian gas through Ukraine, 59% of the amount stipulated in last December’s contract, reports Ukraine’s new gas pipeline operator, OGTSU. However, the contract specifies that Gazprom pay transit fees on the full amount, whether or not it uses the full quota. Under the new contract, Russia is to send 65 bcm through Ukraine this year. After a mild winter, Europe has record high gas stocks and the lowest gas prices in a decade.
Two new cases of coronavirus have been reported in Ukraine, bringing the total to three, one of the lowest numbers in Europe. The two new cases are: a man in Chernivtsi, the site of the first case; and an elderly woman in Zhytomyr Oblast, immediately to the west of Kyiv.
Due to coronavirus, UIA is cancelling 2,000 flights this spring, largely to Western Europe and to Israel. In addition it is suspending service from Kyiv Boryspil to four regional capitals: Chernivtsi, Ivano-Frankivsk, Kherson and Zaporizhia. For comparison, UIA, Ukraine’s flag carrier, made 58,600 flights last year. Similarly, LOT Polish Airlines is suspending flights between Warsaw and Zaporizhia.
This drop in outbound tourism will cancel out an expected decrease in money transfers from Ukrainians taking short term jobs in the EU, says Dmitry Sologub, a deputy central bank governor. “We expect a slight decrease in transfers from abroad, but it will be relatively less than the effect of the fact that travel from Ukraine will now be much lower than they were,” he told reporters Thursday. Ukrainians working abroad send home $1 billion a month.
With one third of last year’s grain harvest waiting for export, the Ukrainian Grain Association asks the government not to close border checkpoints that will block exports. “Stopping grain exports will reduce the volume of foreign exchange earnings,” the Association warns, noting that 20 million tons are to be exported over the next three months. “As you know, every third dollar of foreign exchange earnings of the country comes from agricultural exports.” The Cabinet of Ministers press service said Thursday: “About 70% of all points are planned for closing, but the final list is being specified.”
In one gauge of consumer reaction to coronavirus, customers of Monobank on Wednesday nearly doubled their daily purchases at grocery stores – to $4.8 million – and increased their pharmacy purchases by 150% – to $750,000. Three years after launch, the internet-based bank has 2 million customers, largely Ukrainians aged 20-35.
The central bank plans to disinfect hryvnia currency notes by impounding cash for two weeks before releasing it again to commercial banks. The National Bank of Ukraine believe the coronavirus crisis will prompt more people to make cashless transactions. “Right now, the habit of cashless calculations can come in handy,” the central bank advises. “During this period, order and pay for products and goods online. Do not visit bank branches. Choose remote services. Make utility payments using online services.”
Electronic money is increasingly popular in Ukraine, the central bank reports. Last year, the number of electronic wallets increased by 18%, to 74 million. The volume of operations using electronic money increased 2.3 times, to $670 million.
Ukraine’s network of point of sale card terminals increased last year by 19%, to 333,000. At the same time, the volume of card transactions grew 24%, to $145 billion. Over the last five years, cashless transactions have increased from 25% of the total to 50% today, Inga Andreieva, CEO of Mastercard Europe, told a recent conference in Kyiv.
- Ukraine Closes Land and Air Links to Block Coronavirus
- Companies Cut Travel, Face-to-Face Client Meetings
- Central Bank Sells Another $350 Million to Defend Hryvnia
- New PM Telephones IMF in Washington, Makes Deal a ‘Top Priority’
Ukraine closes three quarters of its 219 land border checkpoints today in an effort to isolate the country from coronavirus, Prime Minister Denys Shmygal told reporters Wednesday. Quarantine areas are being established at the 49 land border crossings that remain open. In addition, the country closes all schools and bans mass events involving more than 200 people through early April. In shopping centers, entertainment areas and movie theaters will close. Mass transit is to continue normally – with overnight sterilizing of trains, trams and buses.
Air links between Ukraine and Italy are ‘de facto’ suspended, Shmygal said. SkyUp, Ukraine’s discount airline, is postponing the start of service to five new Italian cities to late May/early June. The government will spend $4 million to buy gloves, masks, protective suits and infrared screening equipment for Kyiv Boryspil airport. New steps will be posted on Ukraine’s Health Ministry site here.
The steps will hit the economy, but the government will “count the losses” later, Shmygal said after a Cabinet of Ministers meeting. Ukraine has only one confirmed coronavirus case, in Chernivtsi, 500 km southwest of Kyiv. But Shmygal said: “We don’t want to wait until it grows parabolically here. We want to protect Ukrainians and Ukraine to the maximum, and pass this phase as easily as possible.” He predicted: “We hope the epidemic will diminish by summer.”
Multinational companies in Ukraine are suspending domestic and international travel, limiting visitor access and cleaning common office areas as often as once an hour, according to a survey by Interfax-Ukraine that included interviews with Astarta, Continental Farmers Group, Corteva Agriscience, JTI Ukraine, Nestle, and Philip Morris. Today, JTI is holding a trial day where all employees work outside the office.
Asters is moving client meetings to on line formats. For the next month, “our clients and business partners are welcome to join comfortable and secure virtual meetings via Microsoft Teams tools and telephone calls and conferences,” the law firm says. Serhii Sviriba, Asters co-managing partner says: “The No. 1 goal for us is to protect our clients and employees.”
With arms fairs postponed in Malaysia, Qatar and elsewhere, UkrOboronProm will struggle to meet its goal of increasing export sales by 30% this year, Aivaras Abromavičius, general director of the state conglomerate, told reporters Wednesday.
The central bank sold $350 million to defend the hryvnia Wednesday – 30% more than the $270 million the bank sold Tuesday. Today’s official rate is 25.62 hryvnia to the dollar, 8% below the Jan. 2 rate.
The National Bank of Ukraine blamed the weakened hryvnia on “psychological factors, foremost due to Coronavirus.” Asserting that Ukraine’s fundamentals remain sound, with $26 billion in reserves, a bank statement on Facebook said: “The National Bank has a sufficient margin of safety to smooth out excessive fluctuations caused by nervous moods.”
With ample reserves, a manageable budget deficit, and a revived banking sector, Ukraine is in a stronger position to confront a global financial crisis than in the fall of 2008, Prime Minister Shmygal said Wednesday after a meeting with President Zelenskiy and the Ukraine’s Financial Stability Board. Bloomberg reports that on Tuesday night, European Central Bank President Christine Lagarde warned EU leaders in a conference call that the world faces a crisis on the magnitude of 2008.
Also on Tuesday night, Shmygal talked by telephone with IMF Ukraine mission head Ron van Rooden. After the call, Ukraine’s new prime minister said: “The top priority is to launch the IMF Extended Financing Program, especially to support structural reforms, macroeconomic and financial stability in the country.” The IMF is waiting to see Rada approval of bills for a private farm land market and curbs on returning nationalized banks to original owners. Shmygal was joined on the call by Justice Minister Denys Maliuska and Ihor Umansky, Ukraine’s new Finance Minister.
“We agreed on a systematic continuation of cooperation without changing any course,” Shmygal said. “Of the eight parameters that the IMF requested to fulfill, we have two left, and we expect to fulfill them within two, at most three weeks.” Comment may come from Gerry Rice, the IMF spokesman, at his regular fortnightly press briefing in Washington.
Vox Ukraine, an influential group of largely free market economists, warned in an open letter Wednesday: “Ukrainian authorities have no time, and instability in the world requires fast and coordinated action.” Vox reminded: “In the event of a pandemic, global growth can stop completely, as it did in 2009 during the global financial crisis. That year, the Ukrainian economy contracted by 15% and the hryvnia depreciated by 37%.”
Solutions include: “resumption of cooperation with the IMF” and “preparation of stabilization measures to curb the possible outflow of deposits and withdrawal of capital.” Vox concludes: “The situation in the world economy is worsening daily. There is no time or resources for populism, emotional decisions and internal struggle. The question is the fate of millions of Ukrainian citizens.”
The letter was posted as the New York Dow was dropping 6% on Wednesday. It closed 20% below its high, ending an 11-year bull market.
With Ukraine’s exchange rate, bond yields and prices on GDP warrants back to the levels of last summer, Timothy Ash suggests the government buy back the warrants. These 2015 warrants threatening to cost Ukraine billions of dollars in the 2020s. He writes from London: “A buy back would have cost $3.7 billion one month ago. Now it’s down to $2.4 billion.”
Studying the diverging paths of Ukraine and Pakistan bonds in the emerging market sell off, Ash concludes that Ukraine – without an IMF deal and without its financial ‘A Team’ – is paying a 150 basis points penalty. One month ago – before the coronavirus market meltdown and Ukraine’s cabinet purge – Ukraine’s 8-year government bonds were trading at yields of 5.62%. “Now it is 9.4% and heading back into double digits,” he writes. “The cost was likely 150bps on borrowing costs,” he writes. “On $84 billion of debt, that’s $1.26 billion.”
- Central Bank Sells Half a Billion Dollars to Defend Hryvnia
- Low Oil, Gas Prices Push Ukraine into Deflation
- Ze Tells Bloomberg He Is Working Through IMF Checklist
- Smuggling Costs State $2 billion, Kyiv Judges Believe iPhones Cost $10
- Coronavirus Cuts Business Conferences
With the hryvnia down almost 7% against the dollar this year, the central bank intervened Tuesday morning, selling $250 million in foreign currency reserves. This followed the net sale of $307 million late last week. Today’s official rate is 25.31 hryvnia to the dollar, down from 23.69 on Jan. 2.
The National Bank of Ukraine say its mission is not to defend a rate, but to smooth out ups and downs caused by market volatility. The bank said in a statement: “The NBU is maintaining an active presence in the interbank FX market in order to smooth out the excessive hryvnia exchange rate volatility, which has intensified over the past week as market sentiment has worsened amid heightened uncertainty over whether the coronavirus will continue to spread around the world and to rattle the global financial and commodity markets.”
Noting the bank controls almost $27 billion in foreign currency reserves, the highest since Nov. 2012, the bank warns speculators that it “wields sufficient resources to mitigate hryvnia exchange rate fluctuations.” The bank also says that Ukraine has so far “emerged virtually unscathed from the coronavirus’s global spread in February and early March, with Ukrainian exports continuing to rise…Import prices are declining even faster than export prices, especially energy prices, reducing the value of imports.”
Pulled down by a 31% y-o-y drop in the price of natural gas, consumer prices in Ukraine were down 0.3%, compared to January. In annual terms, Ukraine’s y-o-y inflation rate in February was 2.4% – the lowest level since Feb. 2014. By comparison, it was 3.2% in January, 2020, and 4.1% in 2019. Monday’s drop in oil prices is expected to translate into 10-15% reductions in gasoline and diesel prices.
To block the return of nationalized banks to former owners, lawyers are drawing up a banking bill designed to withstand constitutional challenges, President Zelenskiy told Bloomberg Monday. “We need a little more time to agree on this bill,” he said referring to a key demand from the IMF. “I have repeatedly met with the IMF. That’s why [our] lawyers are doing their best.” Ihor Kolomoisky, the main media backer of Zelenskiy’s presidential bid last year, has filed hundreds of lawsuits in a campaign to win back his old bank, PrivatBank.
Zelenskiy said his government is working down the IMF checklist with the goal of winning an agreement. “We have already done more than any previous government,” Zelenskiy said of the free market changes demanded by the IMF. “We have [farm] land left. And banking law. I have pledged to adopt a law on land and to end banking law – we will do that.”
By reaching a final agreement with the IMF on the 3-year, $5.5 billion program, Ukraine will unlock additional low interest financing of €500 million from the EU and up to $1 billion from the World Bank, outgoing Finance Minister Oksana Markarova, wrote last week in a 1,500-word farewell message on Facebook. Markarova, a 5-year veteran of the Finance Ministry, wrote: “We also have agreements with other official lenders, which this year can cover almost all of Ukraine’s financing needs, so as not to resort to market borrowing, which, due to the global crisis unfolding amid the coronavirus epidemic, may be unavailable at an affordable price.”
The bill to create a private farm land market in Ukraine should win final approval by the Rada by the end of this week predicts Oleksiy Mushak, economic advisor to the Cabinet of Ministers,. “10 days until land reform,” he writes on Facebook. “This and next week will be dedicated to the promotion of land freedom and description of opportunities and risks of opening the land market. Stay with us. It will be fun and hot.”
Reviewing two options for an ‘anti-Kolomoisky bill,’ Concorde Capital’s Alexander Paraschiy wrote last week: “Worsening global market sentiment, amid the government’s tough international debt repayment schedule, may force the authorities to reach a compromise with the IMF. For that reason, we remain optimistic about an IMF deal in 2Q20, or 3Q20 the latest.”
With no ministers at the heads of key ministries after last week’s purge, the Cabinet of Ministers promoted four deputy ministers to serve as acting ministers. Pavlo Kukhta will be acting Minister of Economic Development, Trade and Agriculture. Vitaly Shubin will be acting Minister of Energy and Environment. Yuriy Poliukhovych will be acting Education and Science Minister. Svitlana Fomenko will be acting Culture Minister.
Kukhta called for continuity, writing on Facebook: “It is important for our team that the changes and reforms that we managed to launch in six months of work (this is the land market, launching privatization, reforming state enterprises, creating tools to attract investment and much more) do not disappear without a trace and continue for the benefit of the people of Ukraine.”
Smuggling costs the state budget $2 billion in lost import duties every year, Maxim Nefyodov, head of the new State Customs Service, tells NV Radio. In courts last year, the government lost 85% of customs cases, because judges believe that importers “were lucky enough to buy an iPhone for $10,” Nefyodov said. Behind the recent statistical rise of consumer goods imports, Nefyodov says, importers are starting to declare the real value of their goods. Last week, in a speech to the Rada, President Zelenskiy complained that the Customs Service has not eradicated customs in its first six months of work.
Due to coronavirus, four major Ukraine business conferences are being postponed. Dragon Capital’s annual Investor Conference in Kyiv is postponed from its March 19 date. Scheduled for the same day, DEF’2020 International Space and IT Days in Dnipro will be moved to this fall. In New York, Strategy Council’s Ukrainian Investment Roadshow moves from April 14 to Oct. 13. IForum, Ukraine’s largest IT gathering, is moving from May to this fall.
- Ukraine Will Save on Its Oil Import Bill, but a World Recession Would Wipe out Gains
- Ukraine Securities Return to Prices of Last Summer
- Ukraine Poultry Exports Resume to EU
- IT Propels Kyiv Office Expansion
- 1 Million More Cars for Ukraine
- 4G for Kyiv Metro
Short term, Monday’s oil price crash will help Ukraine, a net energy importer. Oil and gas, Ukraine’s top import category, account for one quarter of Ukraine’s imports. In 2018, this import bill was $13 billion. On Monday, Brent fell 24% to $34.50 a barrel, nearly a 20-year low. European gas prices already are at 10-year lows.
Long term, a world recession could drag down prices for Ukraine’s main commodity exports – food and metals. A recession could come about from an economy battered by spreading coronavirus restrictions and the collapse in energy prices. Starting last Tuesday, all of Italy is under lockdown as the government seeks to contain coronavirus. The Saudi-Russia feud that triggered the oil collapse shows no sign of easing.
Global investors’ flight to safety is returning Ukrainian securities to the levels of last summer. On Monday, the yield on Ukraine’s dollar bond due 2028 hit 8.31%, the highest since June and an increase of 183 basis points since Friday. Similarly, nominal prices of Ukraine’s GDP warrants fell 7.4% Monday to 82 cents, the lowest since August. The hryvnia devalued by 1% against the dollar, hitting 25.
This financial hurricane catches Ukraine without an Economy Minister or an Energy Minister. After last week’s Cabinet purge President Zelenskiy has yet to find replacements. Timothy Ash writes from London: “Who advised Zelenskiy to make this move at such a terrible time in global markets with coronavirus?”
Ukraine resumes poultry exports to the EU this week, ending a 6-week suspension due to the discovery of an avian flu case in Vinnytsia Region in mid-January. After imposing a blanket ban on poultry imports from Ukraine, the European Commission decided to zone the ban to a 10 km radius from the affected farm, Khutor. Ten other countries that imposed a ban – including Japan, South Korea, Azerbaijan, Armenia, and Moldova – are expected to follow the EU lead. “MHP resumed exports to the EU since March 7,” said Myronivsky Khliboproduct, the company responsible for most of Ukraine’s exports.
Last year, Ukraine increased its poultry meat exports by 26%, to a record, 414,000 tons, for $579 million, reports Ukraine’s Institute of Agricultural Economics. About one third of exports – 134,262 tons – went to the EU, making Ukraine the third largest supplier, after Brazil and Thailand, reports the European Commission. Last year, Ukraine was the world’s sixth largest producer – after Brazil, the US, the EU (with the UK), China and Turkey.
Chickens represent Ukraine’s animal husbandry bright spot, increasing by 2% y-o-y, to 211.5 million head on Feb. 1, reports the State Statistical Service. By contrast, the national cattle herd – milk cows and beef cows – were down 7% y-o-y to 3.1 million. Similarly, pigs were down 5.2%, to 5.6 million heads. Sheep and goats were down by 5.7%, to 1.2 million heads.
With demand for new office space strong in Kyiv, a record 255,000 square meters are to go on the market this year, more than double last year’s amount, according to a new Kyiv office research report by the CBRE Ukraine, the real estate consultancy. Reviewing office buildings under construction, CBRE estimates the same volume of new office space will come on the market in 2021 and 2022.
IT accounted for 44% of the new office space take up in Kyiv last year. This was followed by industry and energy with 25% and by co-working and temporary offices at 12%. With IT growing at 20% a year in Kyiv, CBRE predicts that the current office vacancy rate of 8.5% will stay roughly same through 2022. “If in the next two to three years, demand will correspond to the supply, then significant fluctuations in rental rates are not expected,” CBRE says. Due to IT companies demanding large floor plates – often 4,000 square meters or more – many office construction projects are fully pre-leased, reports CBRE.
Residential housing increased by 27% last year y-o-y, to 11 million square meters. Newly commissioned housing was almost evenly split between single family houses – 53% — and apartments – 47%. Of the total, 62% were in urban areas. Kyiv City led the nation, with 1.1 million new square meters.
The schedule for ‘big privatization’ tenders – over $10 million – is: Dnipro Hotel and United Mining and Chemical – May; Odesa Port-Side Chemical Plant – August; President Hotel – October; Electrotyazhmash – November; Centrenergo – December. To prepare for sale, the State Property Fund is installing new managers. It is unclear how much success the Fund is having in annulling ‘poison pill’ management contracts.
One million additional cars may hit Ukraine’s roads this year, if current registration figures hold up. In January and February, 61,000 used imports and 14,000 new imports were registered, reports UkrAvtoProm, the auto industry association. Car sales usually pick up during the course of the year.
Ukraine’s first concrete highway – a 160 km road used by Poltava grain trucks going to Dnipro – must be completed by the end of this year, President Zelenskiy vowed Thursday on a site visit. The north-south N-31 highway runs from Reshetilovka, Poltava Oblast to Dnipro, where there are road, rail and river connections to the Black Sea.
4G mobile service could be in all 52 stations of the Kyiv Metro by this time next year – if the Kyiv City Council sets tariffs as a meeting on Thursday, Alexander Komarov, Kyivstar CEO, said at a 4G test launch last week at Akademistechko station, the western terminus of the Red Line. With 4G, the total investment in the Metro by Ukraine’s big three mobile operators – Kyivstar, Vodaphone Ukraine, and lifecell – will total $20 million, estimated Oleksander Kogut, Kyivstar’s director for regulatory support. Last summer, Chinese technology giant Huawei won the tender to supply the mobile equipment for the 69 km largely underground system, which is used by 1.3 million riders every weekday.
- Coronavirus Depresses Ukraine Securities, Forces Bond Auction Cancellation, and Pushes Down Growth
- IMF Deal May Be Over the Horizon
The coronavirus panic has wiped $9 trillion off global markets since Feb. 24, the Bank of America reports. Looking ahead, Bloomberg calculates that the virus could cost the global economy $2.7 trillion this year – about 3% of world GDP.
For the first time in over a year, the Finance Ministry is cancelling its weekly government bond auction, last Tuesday. The Ministry website cited high volatility in global capital markets, largely due to spread of coronavirus. Foreign bond purchases largely dried up in mid-February. For the same reason, the Ministry is postponing for one year stricter rules for assessing banks’ risks for government foreign currency debt securities.
Over the last two weeks, Ukraine’s GDP-linked warrants fell 16% in price, to 90% of nominal value, reports Interfax-Ukraine. At the same time, yields on Ukraine’s Eurobonds have risen by 1.6 percentage points. The culprits are: the global downturn, Ukraine’s cabinet reshuffle and poor economic performance.
Ukraine’s GDP decreased 0.5% in January, the Economy Ministry reported, based on data from the State Statistics Service. This follows a fourth quarter GDP increase of only 1.5%, down from 4.1% in the third quarter.
In a savings for Ukraine, an oil importer, the price of Brent oil has fallen to $45.50 a barrel – 24% below the level of Feb. 20. Prices are to go lower. On Saturday, after OPEC talks failed with Russia, Saudi Aramco offered oil buyers the largest discounts in the last 20 years and promised to increase oil production.
Most of Ukraine’s cabinet underperformed during their six months in office and had to be replaced, President Zelenskiy told Bloomberg in an interview Friday night in his office. “We needed to react to the cabinet’s effectiveness,” Zelenskiy said of his move last week to sack 2/3 of his Cabinet. “When you’re making such deep changes in the country, you can’t fail. It’s not about your personal ratings. It’s not that you can be kicked from power. It’s that Ukraine may not ever have a chance again to do this.”
In a report that may reflect the inertia of earlier research, Fitch Ratings predicts Ukraine will reach a deal with the IMF by June and Ukraine’s economy will grow by 3.5% this year. These factors led Fitch to uphold its ratings upgrade last fall, to ‘B’. However, last week’s radical cabinet reshuffle and the fast-moving coronavirus prompted Concorde Capital and Dragon Capital to issue notes questioning if an IMF deal can be reached this year. “These changes significantly reduce the chances for Ukraine’s smooth cooperation with the IMF,” Concorde wrote. “We no longer see an IMF deal in 2020 as a base-case scenario.”
Ihor Umansky, Ukraine’s new Finance Minister, hopes to travel soon to Washington with Denys Shmygal, the new Prime Minister, to meet with the IMF’s leadership. “The IMF’s expanded financing program is important to support financial stability and implement structural reforms in Ukraine, which is a government priority,” Umansky said after meeting with Goesta Ljungman, IMF Resident Representative in Ukraine,. “Together with our IMF colleagues, we continue to work actively to start the program.” The timing is not good. Due to the coronavirus, the IMF–World bank decided last week to convert their annual spring conference, on April 17-19, into a ‘virtual conference’ with screens and telephone links.
A coronavirus epidemic in Ukraine “can lead to a crisis in the economy,” Timofei Milovanov, Ukraine’s outgoing Economy Minister, warned Wednesday in a farewell message on Facebook. Viktor Lyashko, the nation’s chief sanitary doctor, said Thursday that if there are coronavirus outbreaks, the government “will prohibit mass events, conferences, sporting events and temporarily close schools.”
Preparing for coronavirus, Kyiv will “limit the holding of cultural events in enclosed spaces, as well as carry out wet cleaning using disinfectants and conduct frequent regular through ventilation of rooms,” according to a notice posted on the Kyiv City Administration website. Ukraine’s only confirmed coronavirus case is in Chernivtsi, 500 km SW of Kyiv. There, schools, colleges and universities in the Chernivtsi are closed through March 20 to prevent spread of the virus.
In a half-step toward suspending flights to some EU cities, UIA adopted a policy Friday of allowing travelers to change flight dates free of charge for flights from Boryspil to Italy, Germany and Switzerland. The policy is only valid if there are seats available at the same fare and within the ticket’s validity period. UIA flies to Milan, Rome and Venice. Starting today, Italy locks down most of its north, restricting movements of 16 million people.
The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.
#Ukraine #EU #Coronavirus #Italy #UIA #LigaBusiness #UkraineCorn #MigrationSystem #ITspecialist #UkraineIT #ITUkraine #PermanentResidentPermit #WorkPermit #ITOutsourcing #Top100IT #InternationalAssociationofOutsourcingProfessionals #iaop #UZ #marketforfarmland #landmarket #KyivInternationalInstituteofSociology #Rada #UkraineGovernment #VAT #ExciseTax #ElectricCars # ElectricCarFactory #EntrepreneurshipDevelopmentFund #EnergyMinistery #MinisteryofFinance #Ukrspyrt #Anti-MonopolyAgency #Qterminals #OlviaPort #eco-platform #Ukravtodor #Ukrinform #Naftogaz #JointVentures #ManagingDrillingGroups #Farmak #Interfax #Interfax-Ukraine #pharmaceuticalindustry #WorldBank #IFC #PrivatBank #Ericsson #5G #FT #FinancialTimes #IMF #IWF #MinistryofDigitalTransformation #DigitalTransformation #Huawei #MetroKyiv #percapitaincome #EuropeanTruth #UNIAN #NBU #NationalBankofUkraine #Honcharuk #PrimeMinister #StateFiscalService #TaxChief #Taxevasion #ShadowEconomy #CabinetofMinisters #SpaceIndustry #High-TechIndustry #UkrainianEconomy #SupplyChain #UkrPoshta #Facebook #ChineseEmbassyinUkraine #UkrainianPoultry #MHP #Hryvnia #AgricultureUkraine #UCAB.UA #UCAB #UkrainianClubofAgrarianBusiness #LandMarketUkraine #ITexport #industrialproduction #StateStatisticsService #RegionalDevelopmentFund #Telegram #Zelenskiy #InteragencyCommissiononInternationalTrade #Anti-dumpingduty #steelproducts #taxinspection #StateTaxService #GDP #UkraineGDP #ACC #AmericanChamberofCommerce #Zerotoleranceforcorruption #ShadowEconomy #SBU #StateTaxService #StateCustomsServiceofUkraine #StateBoarderServiceofUkraine #investininfrastructure #Belnaftokhim #EBRD #RivieraShoppingCenter #RetailUkraine #Ukrstat #ICU #labormigration #nominalwagesUkraine #NationalFinancialServicesCommission #Reddit #UStechcompany #StatePensionFund #coalconsumption #Business-in-Smartphone #Vodaphone #4G #GrainExports #Diya #Diya.Biznes #ProfessionalBusinessAdvice #DoingBusiness2020 #DoingBusiness2020Ukraine #InstituteofAgrarianEconomics #ATB #Silpo #Lvivske #Morshynska #Intertop #ThePowerofMoneyMagazine #dsnews.ua #Constructionpermitting #Ukraine24 #UkrainianStartup #StartUpFund #Liga.net #StateAviationServiceofUkraine #ServantofPeople #RazumkovCenter #Onur #ProZorro #Cengiz #UTG #UkraineRealEstateConsultancy #RetailSpace #Novus #BTInvestUkraine #MIPIM #UkraineRealEstateMarket #Promrylad #Altis #CityOneDevelopment #DELTA #DELTAUkraine #DragonCapital #IntergalBud #InvestinProjects #MandarinPlazaGroup #MidlandDevelopment #Toronto-Kyiv #TKPropertyManagement #UDP #UkraineITexport #RingUkraine #Amazon #GreenTariffs #CoalMinesUkraine