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  • China Replaces Russia as Ukraine’s Top Trading Partner
  • Gas Import Bill Fell 26% in 2019
  • Black Sea Dolphin Bobs Up Again
  • 2 Million Ukrainians Apply for Smartphone Driver’s Licenses
  • Traffic Jams? Car Imports Tripled Last Year

China decisively supplanted Russia last year as Ukraine’s top trading partner for goods, according to 2019 trade figures posted by the State Statistics Service. China was Ukraine’s top export market, taking 7.2% of Ukraine’s exports, compared to 6.5% taken by Russia. China was Ukraine’s top source of imports, providing 15.1%, compared to 11.5% by Russia. Improving Russia’s case, Ukraine’s substantial trade with Belarus is probably ‘sanctions-busting’ trade with Russia.

Switching from east to west, Ukraine now conducts 41% of its trade in goods with the European Union. Historically, Russia accounted for one third of Ukraine’s foreign trade. “The key takeaway is that Ukraine is no longer economically dependent on Russia,” Anders Aslund writes in an Atlantic Council essay: “Russia loses leverage as Ukraine exports go global.”

Ukraine’s strong exports to Poland and Germany may indicate that Ukraine is increasingly integrated in the EU’s east-west industrial supply chain, writes Aslund. Poland now is Ukraine’s second largest export destination, taking 6.6% of Ukraine’s exports. Germany and Italy are tied for fifth place, taking 4.8%. “The considerable bilateral trade with Poland and Germany suggests that the Ukrainian economy is integrating into wider European supply chains,” writes Aslund, a Swedish-American economist with decades of experience studying Ukraine and Russia.

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Ukraine imported 11% less natural gas last year than in 2018, and paid 26% less money for it, reports the State Statistics Service. In 2019, Ukraine imported 11.7 billion cubic meters of gas for a total of $2.3 billion. Warm weather, over supply and a European gas glut pushed down prices.

The average price of imported natural gas in Ukraine fell in January to a 10-year low: $175.26 per 1,000 cubic meters. Energy company ETG.UA predicts: “It’s already clear that the ongoing warm winter and the Chinese coronavirus will lower the price bar even lower.” With Chinese factories closing due to the coronavirus gas consumption is dropping. Volodymyr Shvedky, CEO of ETG.UA, says: “Based on this information, we can predict the price in 2020 at the level of $120-$150.”

The Rada is expected to pass this spring a bill to combat ‘sleeping’ oil and gas licenses, says Prime Minister of Ukraine Honcharuk.  “If an investor is ready to invest honestly, to receive licenses on a competitive basis,  to pay taxes, to create jobs, we welcome him to work,” Honcharuk said last week on a visit to Poltava Region, currently the source of 40% of gas produced in Ukraine. “If there is a desire to take some licensed sites somewhere for a bribe. and then to sit on them for decades, to do nothing – that will not work.” Retarding gas production, there are hundreds of such cases across Ukraine.

DTEK Oil & Gas plans to drill five deep wells this year, allowing gas production to hit 2 bcm next year, the company reports citing Extraction and Processing Director Oleksiy Raptanov.

Burisma Holdings, another private gas company, plans to drill 15 wells this year. “We continue to invest in the exploration and development of new areas to increase domestic hydrocarbon production,” Burisma board member Karina Zlochevska said, according to Burisma’s press service.

A new tender to develop the Dolphin hydrocarbon section on the Black Sea shelf may be held in March 2020. This was announced at a press conference by the head of the State Service for Geology and Subsurface Resources Roman Opimakh. Last summer, Trident Acquisitions, an American company, won a tender to develop the 9,500 square kilometer block. The new government cancelled the tender.

Three weeks ago, President Zelenskiy told visiting US Secretary of State Michael Pompeo that ‘big American companies’ are welcome to bid to develop Ukraine’s Black Sea shelf. “We are inviting big American companies to extract natural gas and oil in Ukraine,” he said.

Near the Dolphin block, Exxon Mobil wants to sell its 50% stake in the Neptun Deep offshore project, located in Romania’s Black Sea waters. This decade-long project lost momentum when a government change in Bucharest resulted in price caps, taxes and export restrictions. A new government is reversing these policies. But, with European natural gas prices as 20-year lows, Exxon Mobil lost interest.

Two weeks after the launching of Ukraine’s new Diya citizen portal, the app has been downloaded by 1.5 million Ukrainians – about 5% of the adult population. About 80% of registrants have applied for digital driver’s licenses and car registrations, reports PrivatBank. About 70% of registrants reached Diya through Privat24, the bank’s electronic banking portal.

Used car imports tripled last year, to 448,400, reports Ukravtoprom, the auto industry association.  Imports of new cars increased by 28%, to 95,600. Part of the increase of used car imports was due to last year’s tax amnesty on unregistered used cars already circulating in Ukraine. Last year, Ukrainians spent $3.6 billion on imported cars, almost double the $2 billion spent in 2018.

Ukraine’s prime interest rate could fall 7% next summer – six months ahead of schedule, Economy Minister Timofei Milovanov told the Rada Economic Development Committee on Thursday. On March 12, at the next meeting of the National Bank of Ukraine Board, the prime rate could be cut by 200-250 basis points. After the Jan. 31 cut of 250 basis points, prime is 11% — more than triple the inflation rate of 3.2%. At that meeting, Yakiv Smolii predicted that the prime rate at year’s end will be 7%.

UIA’s planned 20% cut in flights this year will drag down Kyiv Boryspil’s traffic numbers by 3%, airport director Pavel Ryabikin predicts to reporters. This year, 14.7 million travelers will use the airport, with no season falling below 1 million a month. Last year, Boryspil handled 15.3 million passengers, making it the fastest growing big airport in Europe, according to ACI Europe. This airport association also ranked Kharkiv airport as Europe’s third fast growing airport in less than 5 million passenger a year category.

This week, Odessa airport completes the transfer of all departure and arrival flights to the new terminal building. In the 8-year long terminal construction project, the new terminal opened for arrivals three years ago. A similar slow motion project – construction of a new runway and taxi apron – may be completed this year.

  • Investments Flow into Kyiv-Controlled Donbas
  • Italy’s Richest Man Buys Ukraine’s Largest Eyeglasses Retailer
  • From Quarantine to Containers: German Company Invests to Transform a Historic Odesa Wharf into Ukraine’s Largest Container Terminal

France will invest €100 million to upgrade infrastructure in government-controlled Luhansk Region, Governor Sergei Gaidai reports after a ‘very constructive’ meeting in Kyiv with French Ambassador Etienne de Ponsen. France will pay for train tracks to connect Ukraine’s national network with Lantrativka-Kindrashivska-Nova line. This 225 km line runs from a northern border with Russia to a southern border with Russia. At present, Luhansk’s nine easternmost districts are cut off from Ukraine’s rail system. French aid will also go to electrifying much of the Luhansk rail network and for cleaning drinking water.

As part of a wider program to restore normal services to the government-controlled half of the Donbas, Ukraliznytsia returned passenger trains last month to a stretch of track that runs near the Donetsk front line. For the first time since 2014, trains are running on the Fenolna (Novhorodske)-Skotuvata line. Workers repaired shelling damage to Skotuvata station. For passenger security, video cameras and a safety fence were installed.

China is preparing to invest $600 million in a five-year project to nearly double the capacity of Donbasenergo’s coal-fired power plant in Slaviansk, Donetsk Region. The addition of 660 MW is needed because Donbasenergo’s other power plant, Starobesheve, 170 km to the south, is in Russia-controlled Donetsk. Under an investment agreement signed with Dongfang Electric International Corporation the total project cost is to be $684 million. To go ahead with the project, China expects Ukraine to provide state guarantees for $600 million, Liu Jun, Chinese embassy trade adviser, tells Interfax-Ukraine.

Rinat Akhmetov, the Donetsk native who is now Ukraine’s richest man, is gaining favor with President Zelenskiy, balancing the influence of Ihor Kolomoisky, reports The Financial Times. “Mr. Akhmetov is indispensable if Mr. Zelenskiy is to solve one of Ukraine’s most intractable problems — the still smoldering war with Russian-backed separatists in the east,” writes Roman Olearchyk. “Mr. Akhmetov’s ability to offer thousands of people job security — or put them out of work — makes him a key to a peaceful settlement. Mr. Akhmetov ‘would have to be part’ of any Donbas peace agreement, a western diplomat said.”

In the 2020s, drivers in eastern Ukraine increasingly will travel over roads paved with fly ash and metallurgical slag. Under a Cabinet of Ministers decree, “On the Use of Industrial Wastes in Road Construction, published Wednesday, contractors building roads in Donetsk, Dnepropetrovsk, Kirovohrad, Luhansk, Mykolaiv and Zaporizhia regions should use cement mixes containing at least 10% of fly ash or slag. In general, Ukraine uses half as much industrial waste in road construction as comparable countries, reports the Center for Transportation Strategies.“

Franco-Italian holding EssilorLuxottica, the world’s largest manufacturer and retailer of eyeglasses and lenses, has bought Ukraine’s Luxoptica, Ukraine’s largest retailer of glasses and lenses. The ultimate owner of Essilor is Leonardo Del Vecchio, Italy’s richest man, assessed by Forbes to have a net worth of $25.8 billion. The sales price for the 176-store Ukrainian chain was not revealed. Since taking his company public in 1990, Del Vecchio has made a series of purchases, including LensCrafters, Ray-Ban, Sunglass Hut, and Oakley. One of his sons, Claudio, owns and manages the New York-based clothing retailer Brooks Brothers.

Germany’s Hamburg Port Consulting delivered four Liebherr rubber tire gantry cranes to its Container Terminal Odesa last week, a key part of a 5-year, €30 million investment project. Visible from Odesa’s Potemkin Steps, the terminal, historically known as Quarantine Harbor, is Ukraine’s busiest container terminal. Last year, it accounted for almost 40% of the 1 million containers handled by Ukraine’s Black Sea ports. The company is building capacity to handle 1 million containers a year. Already, 400 refrigerated containers can be plugged in simultaneously.

Fresh from awarding a 35-year management concession of Olvia port to Qatar’s QTerminals, Infrastructure Minister Vladyslav Krykliy traveled to Doha to say that new port concessions are coming this year for terminals in Berdyansk, Mariupol and Odesa ports and for the airports of Chernivtsi, Kherson, Lviv, and Zaporizhia. “Almost all strategically important projects are aimed at realizing Ukraine’s transit potential,” he told the Qatar Maritime & Logistics Summit 2020. “Our favorite right now is infrastructure concession…We guarantee the transparency of all competitions and the equality of participants, and we will be glad to see Qatari companies as winners.”

Digitalization has the potential to cut corruption, to cut red tape and to make Ukraine more attractive to young people, Anatoly Motkin, president of StrategEast, writes in “Ukraine in a Smartphone: Zelenskiy’s Dream.”  “[This campaign] may well be the most effective way to speed Ukraine along in its ambitious transformation away from the corruption and dysfunction of the post-Soviet era,” he writes in an essay posted by the Atlantic Council. He writes that blockchain could render land registries tamper proof, digitalized health records will improve health care delivery, on line voting will raise voter turnouts among young people, and digital IDs will cut phantom workers from state payrolls. He concludes: “Digitalization has the potential to become an unrivaled tool for change.”

Now under private ownership, the fabled Kharkiv Tractor Plant is undergoing a $10 million modernization, installing American, German and Japanese equipment. Five years ago, Oleksandr Yaroslavsky, president of DCH, Kharkiv’s largest business group, bought the tractor company which was on the verge of collapse. The factory opened in 1931, building Soviet versions of International Harvester tractors, partly to replace horses slaughtered by Ukrainian peasants resisting collectivization.

A 2,000 square meter mountain hotel has been auctioned off for $710,000 – 27% of the initial asking price. Built for National Bank of Ukraine employees to vacation in the Carpathian resort town of Yaremche, Ivano-Frankivsk Oblast, the Prykarpattia hotel is complete, but for a 200-meter sewage hookup. Relieved to see qualified buyers participate last month in the third auction attempt, Taras Yaleyko, deputy chairman of the State Property Fund, writes on Facebook: “Soon, we hope this property will become one of the attractions of Yaremche.”

Boryspil airport opens a new business lounge next week. Located on two floors of Terminal D, the 800 square meter lounge has seating for 230, a meeting room, and a play area for children. 

UIA plans to start flights between Kyiv Boryspil and Jeddah, Saudi Arabia in late May. The 7-hour flight to the Red Sea port city comes as UIA shifts planes away from destinations that require flights around countries banned for Ukrainian planes – Russia, Iraq and Iran. 

  • Government Bond Sale Stumbles
  • IMF Team in Town
  • Naftogaz Flirts with IPO
  • King Coal Cut Down to Size
  • Surkov Out – Stage Set for A Donbas Détente?
  • Hotel With A View: Dnipro Goes On Sale This Spring 

Demand for Ukraine hryvnia bonds was only 40% of supply in the Finance Ministry’s Tuesday auction. Despite this collapse in demand, the Ministry kept cutoff rates for the three bonds around 10%. While demand for 18-month bonds met supply, demand for 3-year bonds evaporated. With 2 billion hryvnia, or $82 million, in 3-year bonds on offer, demand only totaled $1.6 million. In total, investors bought $73 million worth of bonds, out of $184 million on offer.

An IMF deal is the most important factor influencing Ukrainian bond prices, Yuriy Butsa, the government commissioner for public debt, told Interfax-Ukraine in an interview before Tuesday’s auction. “The most important factor that affects the price of our bonds is the continuation of cooperation with the IMF,” said Butsa, a Finance Ministry official. “The correlation between statements or expectations regarding cooperation with the Fund and the level of quotations of our bonds is very clear.”

An IMF team is in Kyiv for technical discussions, Goesta Ljungman, the IMF resident representative in Ukraine tells the UBN. “Nothing special,” he says. “It easier to talk in person, than on the phone.”

On Saturday, President Zelenskiy met for the second time in one month with IMF Managing Director Kristalina Georgieva. At last weekend’s meeting, in Munich, the two discussed steps Ukraine needs to take to win IMF Board approval of a new 3-year, $5.5 billion Extended Fund Facility. A key IMF demand is Rada approval of a law to ban the return of nationalized banks to former owners. This law is aimed at Ihor Kolomoisky, Zelenskiy’s main media backer, who lost his bank, PrivatBank, in December 2016 after regulators determined it was $5.5 billion under water.

Timothy Ash writes from London: “Drift with the IMF is now a real risk. Market guys might conclude: Ukraine no longer needs IMF financing, it can fund itself in the market…[that the] Ukraine macro story can endure the IMF walking away…Walking away from the IMF would be a disaster for Ukraine, long term, as it would slow much needed structural reform, and the process of cleaning up the business environment/ rule of law.”

Naftogaz Chairman Andriy Kobolyev says he sounded out investment bankers last week about a Naftogaz IPO – and won “a very positive response.” He writes on Facebook about a possible initial public offering of company shares: “Last week, I held a series of consultations with investment banks and potential investors on the prospects of a Naftogaz IPO and received a very positive response.” Last month, the Cabinet of Ministers included Naftogaz on a reduced list of ‘strategic enterprises’ where the state must remain a majority shareholder.

Laws to legalize gambling and to create a farmland market will only win approval in late spring because each bill has been saddled with about 4,000 amendments, Danylo Hetmantsev, chair of the Rada’s Finance, Tax and Customs Policy Committee, tells Ukrinform. Oleg Marusyak, a committee member, estimates that the first year of legalized gambling will net the government $100 million in taxes.

In line with Ukraine’s new commitment to close all coal mines by 2050, a job retraining and relocation project for miners was announced last Tuesday by Alexei Orzhel, minister of Energy and the Environment. Noting that coal stockpiles are growing to record levels at thermal power plants in the current mild winter, he said: “The climate has changed.” Addressing the nation’s estimated 300,000 miners, he said: “Our people who work in the energy sector must be offered a new future. We need to look for new jobs for them.”

Ukraine produced 31 million tons of coal in 2019 – 23% of the amount in 1991, the year of Independence. During 150 years of coal mining in Ukraine, volumes peaked in 1976, when 218 million tons was produced in Ukraine SSR – about half of all Soviet metallurgical coal. Since then low coal prices have not justified investment, subsidies have been cut, and many mines have been closed.

Renewable energy and accumulating capacities should develop in the country, because this progress is the future, and coal and its burning are the past,” Orzhel said. Despite this vision, investment in new wind and solar projects has been largely frozen during first six months of the Zelenskiy government. The Energy Ministry and investors have been unable to reach an agreement on green tariffs.

Bidding for the lucrative China trade, Nova Poshta says it does not plan to suspend delivery of parcels between Ukraine and China, Interfax-Ukraine reports. “We continue to deliver parcels from Ukraine to China, but local delivery within China itself may occur with delays,” the delivery service says. “This is due to restrictions in the work of Chinese companies in connection with coronavirus.” Last week, Ukrposhta, the state postal service, said it would no long accept parcels for China and that deliveries from China could face delays. Ukraine is one of the top 10 global markets for China’s AliExpress.

Preparing to raise money through bonds, Nova Poshta has won a uaA credit rating from Rating Agency Standard-Rating, Nova Poshta’s press service reported Tuesday, citing Pyotr Fokov, Nova Poshta Group CFO. One year ago, the delivery service raised the hryvnia equivalent of $12 million at 22% per annum. This year, the company plans to invest $100 million in infrastructure development, company co-owner Volodymyr Popereshniuk wrote last month on his Facebook page.

Normalization of economic relations between Kyiv-controlled Ukraine and the Russia-controlled portions of Donetsk and Luhansk regions could increase Ukraine’s GDP growth by half a percentage point, according to a Bank of America report. Three years ago, President Poroshenko ended all large scale trade, largely coal purchases, with the separatist controlled areas.

Hours after a major separatist attack on a Ukrainian army position in Donetsk Region, President Putin fired Vladislav Surkov, his advisor on Ukraine since 2013. As architect of the two separatist ‘republics’, Surkov pushed a consistently hardline policy. His replacement, Dmitry Kozak, a pragmatist, had negotiated the two prisoners swaps late last year with Andriy Yermak. Two weeks ago, President Zelenskiy made Yermak his chief of staff. Yermak and Kozak are seen as interested in crafting an economic détente between Ukraine and Russia.

Kyiv’s Hotel Dnipro, the 13-story Soviet era landmark at the European Square end of Khreshchatyk Street, will be auctioned this spring at a starting price of $10 million, the State Property Fund announced Tuesday. Built in 1964, the 186-room hotel features the Panorama Restaurant, a top floor dining room with romantic views of the Kyiv Hills and the Dnipro River. To get the hotel in shape for privatization, the Fund appointed as director, Elina Sapozhkova, a hotel professional with experience in opening and developing hotels of Rezidor Hotel Group, IHG, and Hilton Hotels & Resorts. In 2018, the hotel has $2 million in revenues.

Starting in May, the first properties of Ukrspyrt, the former state alcohol monopoly, are to be privatized through ProZorro, the electronic auction house. Over the next year, the State Property Fund will sell off all 41 properties, ranging from abandoned buildings to fully functioning alcohol distilleries. In December, when the Rada abolished the state alcohol monopoly, an audit discovered that only one third of Ukrspyrt’s plants were functioning. The government hopes to earn as much as $100 million from the sale.

  • Goal: Double FDI This Year
  • Seaports for Sale
  • Next for Concessions: Hospitals and Universities?
  • One Quarter of Ukraine’s Economy is Off the Books
  • US-Ukraine Rocket Reaches Space Station Today
  • Back on Earth, Domestic Flights to Conquer Ukraine’s Wide Open Spaces

The government aims to draw $5 billion in foreign direct investment this year – double last year’s level, Timofei Milovanov, Minister of Economic Development, Trade and Agriculture, said at the presentation of a Zelenskiy road map – ‘Economic Strategy: Growth through Investment.’ Keys will be: investments in infrastructure, implementation of Ukraine’s nearly 50 industrial parks, and building the rule of law. Hot investment sectors will be: farming, IT, energy, chemicals, pharmaceuticals, the space industry and food processing.

To trim the Soviet legacy of state companies, the government plans to sell five ‘big’ companies and more than 300 ‘small’ ones, according to the official Economic Strategy blueprint. A big company is valued over $10 million. Investors could be eligible for a 5-year corporate income tax exemption. The government hopes to earn $500 million through state company sales this year. Last year, small scale privatizations bought in $33 million.

Ukraine plans to put up for sale three small seaports:  Skadovsk, in Kherson, facing Crimea; and two in western Odesa region – Bilhorod-Dnistrovskyi, on the Dnistr estuary; and Ust-Dunaisk, on the Danube River delta. Infrastructure Minister Vladyslav Krikliy told NV Biznes: “It is unlikely that anyone will go there for concession. They are very unprofitable. They no longer have enough money for the payroll.” Last month, foreign companies won tenders for concessions to run two seaports – Kherson and Olvia.

Hospitals and universities could eventually be put up for concession, Minister Milovanov said Monday. He told reporters: “For concessions, we have packages of ports, airports and train stations. In the future, I think it is possible to talk about hospitals and universities.”

Eleven private banks want to join four state banks in participating in the “5-7-9%” program to extend low interest loans of up to $60,000 small and medium businesses. In the first two weeks of the program, the four state banks – Oschadbank, Privatbank, Ukrgasbank and Ukreximbank – received about 1,500 applications and issued $1 million in loans, reports Economy Minister Milovanov. Under the formula, the more jobs created, the lower the interest rate. This year, 50,000 entrepreneurs are to borrow from an $800 million fund. Private banks applying to join the program are: FUIB, Raiffeisen Bank Aval, OTP, Alfa Bank, Pravex, Creditvest Bank, International Investment Bank, Alliance, Lviv Bank, Kredobank and Vostok.

With President Zelenskiy calling for 10% home mortgage rates this year, Minister Milovanov said Monday the government is working on a program to offer “an affordable mortgage rate this year.” Zelenskiy argues that affordable mortgages will stem emigration and build a strong middle class. The National Bank of Ukraine says banks are reluctant to make mortgage loans for three reasons: the moratorium on foreclosing foreign currency loans, insecurity of creditors’ rights, and opacity of the housing market.

Almost one quarter of Ukraine’s economy is off the books, according to a new study by Ernst & Young, funded by Mastercard and published by the National Bank of Ukraine. With 23.8% of Ukraine’s economy in the black, Ukraine is on the high end of 33 other countries studied by E&Y. In this group, shadow economies ranged from 10 to 27% of GDP.

With Ukraine’s 2019 GDP estimated at $154 billion, the shadow estimate would mean that Ukraine’s real economy is $190 billion. Using the government’s new 37 million estimate of Ukraine’s population, this means real GDP per capita is $5,135, almost two thirds higher than the widely accepted estimate of $3,100.

Private gas company production is to increase by 28% this year, while state production is to decline by 2%, Andrei Favorov, head of Naftogaz’s integrated gas business, predicted to reporters Monday. UkrGazvydobuvannya, the Naftogaz production unit, will produce 14.6 billion cubic meters, far short of the “20 bcm in 2020” goal set two years ago by the Poroshenko government. Private companies are to increase production to 5.9 bcm. Andriy Favorov, head of Naftogaz’s integrated gas business, said the company will pursue a three prong strategy this year: “The first is production from deep deposits, especially under Shebelinka. The second is gas from shale rocks. The third is Black Sea shelf. The result is a trident.”

Lemtrans, Ukraine’s largest private freight car operator, invested $50 million in capital expenditures last year, up 69% over 2018. Owned by Rinat Akhmetov’s SCM Group, Lemtrans bought 1,107 freight cars and repaired 6,904 more. Largely hauling coal and iron ore, Lemtrans moved 52.5 million tons of cargo last year, virtually the same as 2018. Lemtrans is one of several logistics companies studying the purchase of locomotives in the event Ukrzaliznytsia surrenders its monopoly on running freight trains down the state-owned rail network.

Ukraine Prepares To Snub China In Aerospace Deal With U.S. Help, headlines Forbes about a bid by China’s Skyrizon to legalize its purchase of a controlling stake in Motor Sich, a leading manufacturer of helicopter and jet aircraft engines. Yuriy Terentyev, chairman of the Ukraine’s Antimonopoly Committee, tells Forbes his committee is building a case to block the sale, using US-supplied information about Beijing Xinwei Technology, parent of Skyrizon. “We are investigating the fact that the Chinese side may have illegally acquired control over Motor Sich as of the beginning of 2017,” Terentyev tells Forbes contributor Katya Gorchinskaya.

A US-Ukrainian Antares rocket blasted off Saturday from a NASA facility in Virginia. Today, its payload, nearly four tons of supplies, are to arrive at the International Space Station. Partly designed by Dnipro’s Pivdennyi Design Bureau and made by Pivdenmash, the rocket carried into orbit Northrop Grumman’s robotic Cygnus cargo spacecraft.

Betting on domestic air travel, Windrose launches regular flights in April from Kyiv Boryspil to Ukraine’s largest regional capitals Dnipro, Ivano-Frankivsk, Kharkiv, Lviv, Mykolaiv, Odesa and Zaporizhia. This will be the only scheduled flight from Mykolaiv. Averaging 90 minutes, the flights carry introductory, one-way fares of $30. Flights will be operated by new ATR72-600 Franco-Italian turboprops, regional planes that seat 70. This spring, to boost domestic air traffic, the Rada is to abolish VAT taxes on domestic flights.

Lviv airport has increased its passenger handling capacity by 50%, to 3,000 passengers an hour. In one step, the luggage belt for international flights was nearly doubled, to 142 meters. The luggage belt for domestic flights was increased by one quarter, to 100 meters. With traffic up 39% last year, to 2.2 million people, Lviv offers direct scheduled flights to 24 EU cities. This spring, scheduled flights start to: Belgrade, Bergamo, Budapest, Naples, Poznan, and Rome.

  • GDP Growth Lags, 2019 Ends With a Whimper
  • Farmers Hoard Cash to Buy Land This Fall

GDP growth fell to a disappointing 1.5% in the last quarter of 2019, according to a flash estimate by the State Statistics Service. This indicates GDP growth was at, or below, the 2018 level of 3.3%. After a slow start – 2.5% for the first quarter – Ukraine’s GDP roared ahead in the second quarter, at 4.6%, then fell in the third quarter to 4.1%.

Pulling down the fourth quarter were early fall harvests and lower industrial production, due to weak steel prices, US tariffs and warm weather cutting energy consumption, Timofei Milovanov, minister of Economic Development, Trade and Agriculture, writes on Facebook. Looking ahead, the State Statistics Service reports that indicator of economic sentiment in the first quarter of 2020 is 103, down from 113.4 in the last year quarter of 2019.

Oleksiy Blinov, chief economist for Alfa-Bank Ukraine, writes: “As the slowdown in 4Q19 was associated to some temporary factors (weak harvest of late crops, steel sector slump, mild weather), we expect economic growth to accelerate back already in the first quarter of 2020.”

On the lower economic growth number, quotations of Ukraine’s GDP-linked warrants fell Friday fell by 1% to 107.9% of the nominal value, reports Interfax-Ukraine. At the new GDP levels, Ukraine’s payouts “are very likely to fall below $50 million,” writes Blinov of Alfa-Bank. “We expect Ukraine’s real GDP to grow another 3.2% in 2020, with domestic demand maintaining strong contribution into economic expansion, supported by low inflation.”

Foreign business leaders stressed the need to purge judges and build a Western-standard court system in a meeting Thursday with President Zelenskiy. “I voiced the #1 priority for business – Rule of Law. This, together with trust, transparency, and political will, is the key component for attracting FDI,” Andrew Hunder, president of the American Chamber of Commerce in Ukraine, wrote later to members. “I stressed that we have a common goal – to attract $50 billion of foreign direct investment to Ukraine over the next five years.”

Zelenskiy promised to institute once-a-month meetings with leaders of the foreign business groups. Every day we do everything to make the country more attractive – more attractive for business,” said the president, a media entrepreneur. “We are doing things that the President and government simply do not do in a modern European country. But we are ‘cleaning’ Ukraine from all the dirt – and there is too much dirt. You can help us by opening new offices and projects.”

Foreign banks are expected to enter Ukraine’s foreign exchange market this year, Oleh Churiy, a deputy governor of the National Bank of Ukraine, said Thursday at a meeting with the European Business Association. Commenting on the central bank’s decision last week to allow foreign banks to trade in hryvnia, he said: “We expect that by the end of the year five or six foreign banks will enter the market and start [forex] trading.” Separately, the central bank reported that foreign holdings of Ukrainian domestic bonds has hit 127 billion UAH, or $5.2 billion. This represents 15.7% of the market.

Heard at the recent European Business Association Global Outlook: Boosting Investments conference:

Farmers are saving money to buy their rented fields. They are cutting purchases of combines and other farm machinery by up to 40%, says Alex Lissitsa, CEO of IMC, a major agrobusiness. He said: “Investments in technology will be suspended in the next two years. Everybody started to save all their money, as it’s likely that the banks won’t give big loans.” This spring the Rada is to pass a limited law allowing Ukrainian farmers to buy and sell up to 10,000 hectares. The market would start in October.

With low inflation, 3-4% GDP growth, and strong foreign currency reserves, Ukraine now enjoys its best macroeconomic situation in 20 years, says Oleksandr Pysaruk, СЕО of Raiffeisen Bank Aval. He adds: “It’s the result of an adequate macroeconomic policy made by the government and the National Bank of Ukraine.” Due to this policy, he adds: “We can expect a reduction in credit rates to 10-12% for reliable borrowers this year.”

In Central Europe, “when something is set for sale there, there are 20-30 interested investors – in Ukraine – it’s three to five investors,” says Tomas Fiala, a Czech national who is CEO of the investment fund Dragon Capital. Despite this cautious investor environment, Fiala, who is President of the EBA, says: “During the first half of the year, we will close several new deals worth more than $200 million.”

Last year, 600,000 people – about 3% of Ukraine’s workforce – left the country to find work, Oleksiy Kredisov, managing partner of EY Ukraine, says citing a survey conducted by his professional services company. At the same time, candidates for vacancies inside Ukraine declined 3-fold.

With urbanization taking place at a high rate, BT Invest Ukraine is concentrating its retail development and construction on Kyiv city and region, says Igor Landa, the company CEO. Even though office salaries increased by 10% and construction salaries by 20% last year, his company has 750 vacancies.

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

 
 
 

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