WASHINGTON, D.C. - The "Ukraine Macroeconomic Situation - April 2016" analytical report prepared by the SigmaBleyzer, a private equity investment management firm, www.SigmaBleyzer.com, and The Bleyzer Foundation (TBF), www.BleyzerFoundation.org, Kyiv, Ukraine, members of the U.S.-Ukraine Business Council (USUBC), http://www.USUBC.org, is found below. 

NOTE:  The complete April 2016 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 and at the following link: http://www.sigmableyzer.com/macroeconomic-updates/current-reports/.  
Executive Summary:

v The recent political crisis in Ukraine ended with a reshaping of the ruling coalition and the appointment of a new Cabinet of Ministers. The new parliamentary coalition includes 207 members from President Poroshenko’s Block and the People’s Front, as well as 20 independent parliamentarians. The total coalition of 227 parliamentarians is just above the required 226 majority.

v Newly appointed Prime Minister Volodymir Groisman announced that his immediate reform agenda includes restoration of cooperation with international financial institutions including the IMF. He also stated that the fight against corruption remains a priority for the government. Other important items in the PM’s agenda include carrying out judicial reform, tax system reform, business deregulation and public administration reform. In addition, the government promised to ensure open and transparent privatization of state enterprises.  

v Preliminary estimates by the State Statistics Committee indicate that year-over-year growth of GDP in the first quarter of 2016 was positive, though by a small percentage of 0.1%.  The latest high-frequency data from the State Statistics Committee also shows that Ukraine’s macroeconomic situation is continuing to improve.  In March 2016, industrial production increased by 4.8% compared to March 2015. 

v In March 2016, a deceleration in the growth of revenues and an acceleration in growth of expenditures, both at central and local levels, led to a 50% shrinking in the consolidated fiscal budget surplus.  Nevertheless, the overall consolidated budget balance for Q1 remained positive at UAH 3.9 but it more than halved in one month.

Consumer inflation has continued to decelerate at a high pace in March thanks to increased supply of whole foods.

Both bank deposits and loans posted rather sluggish performance in March, but expectations of banking sector dynamics over the next 12 months significantly improved.

The UAH/USD exchange rate appreciated for most of April. Increased supply of dollars on the side of exporters and agribusinesses was the main reason, but the trend was also supported by stabilization of the political situation in the second half of the month.

In April, the NBU held 13 forex auctions to mitigate appreciatory fluctuations of the exchange rate and replenish international reserves purchasing USD 676 million in the interbank forex market.

v In March 2016, the current account deficit increased to USD 448 million from USD 208 million in February.  This deterioration was due to a significant increase in the deficit on primary income (principally interest payments) from a surplus of USD 38 million in February to a deficit of USD 425 million in March. But this deterioration on primary income was partly compensated for by improvements in the merchandise trade balance, caused by increased exports and lower energy imports.

v In January-March 2016, goods exports to Russia decreased by 39.5% yoy and now represent 7.5% of total exports, compared to 10% in January-March 2015. Exports to Asia decreased by 21.2% yoy, representing 35% of total Ukrainian exports.  Exports to Europe declined by 2.9% yoy and now account for 37% of exports.

v There is currently an IMF mission in Kyiv, discussing with the government the possibility of a new disbursement of USD 1.7 billion. The government has taken a key measure required by the IMF, which is the increase in gas prices for the population.  But there are a number of other pending conditions for disbursements, including monetary policies, banking rehabilitation, anti-corruption policy, pension reform, judicial reform, the reform of tax administration, reforms of state-owned enterprises, and privatization. The result of the review should be available by the end of the month. If the result is positive, in addition to the UAD 1.7 billion from the IMF, Ukraine will be able to secure an additional USD 2.3 billion in financial aid from other multilateral and bilateral institutions.

To read the more please open the attachment.