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Intellinews - Ukraine Financial Sector Report - July 2013

  • July 2013
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 30 pages

Ukraine’s economy contracted by x.x% on the year in the first quarter of 2013. The gross domestic product (GDP) in current prices amounted to UAH 301.598bn in Q1. In q/q terms, the GDP grew by x.x%, which was predetermined by a seasonal factor. GDP per capita amounted to UAH 6,624, down by x.xx% y/y. The country’s economic growth slowed to x.x% in 2012 from x.x% in 2011. After first-quarter GDP data was released, most of the rating agencies and global financial institutions lowered their full-year GDP growth forecast for Ukraine. Standard & Poor's expects a GDP growth rate of x% under the optimistic scenario. Under the pessimistic scenario, the GDP growth in Ukraine in 2013 is forecast at x.x%.

Ernst & Young has worsened its GDP growth forecast to x.x%y/y in 2013. In 2014-2016, E&Y expects GDP growth to reach x% on condition that European markets recover. The European Bank for Reconstruction and Development (EBRD) cut its forecast for the second time this year and now expects a x.x% y/y decline in 2013 before the economy rebounds to a x.x% growth in 2014. The International Monetary Fund (IMF) forecasts a zero GDP growth in Ukraine this year and a growth of x.x% in 2014. Inflation may reach x.x% in 2013 accelerating to x.x% in 2014, the IMF said. The World Bank has maintained its GDP growth forecast for Ukraine at 1% in 2013. The World Bank believes that the high fiscal deficit, continuous current account deficit and high external debt remain the main challenges for Ukraine. In addition, the national currency de-facto peg to the dollar and declining foreign reserves also remain a concern for the authorities. Fitch's forecast assumes some further depreciation in the hryvnia to UAH 8.5/USD by end-2013 and UAH 9/USD by end-2014. Depreciation on this scale would be manageable for the financial system and the economy.

S&P said that Ukraine's ratings are constrained the political uncertainty, financial sector turmoil, as well as weak external liquidity. In particular, the agency believes that the government's strategy to secure foreign currency to meet its high external financing needs over the medium term remains dependent on favorable financing conditions in the capital markets. The ratings are supported by Ukraine's still relatively low, although rising, government debt burden and fairly diversified economy.

Fitch notes that Ukraine could strike a new deal with the IMF, thereby unlocking the necessary funds to refinance liabilities to the IMF. However, barring a further sharp deterioration in external financing conditions, Fitch no longer expects Ukraine to reach an IMF deal in 2013. In addition, Fitch pointed out that Ukraine runs a wide current account deficit of x% of GDP. The national bank depleted its reserves by xx% to barely two months' of current account payments in the year to end-May 2013 to support the hryvnia. The authorities have limited room to fight any renewed pressure on the currency, raising risks of sharp exchange rate depreciation. High dollarization and foreign-currency exposure makes government solvency, banks' balance sheets and the overall economy vulnerable to such an event.

Table Of Contents

Intellinews - Ukraine Financial Sector Report - July 2013
Executive summary
Sector overview
Ukraine's GDP down 1.1% y/y in Q1.
Ukraine's EconMin sees positive GDP growth dynamics
SandP expects GDP growth of 1% in 2013.
Ernst and Young worsens 2013 GDP growth forecast to 1.1%.
EBRD sees Ukraine's economy contracting by 0.5% y/y in 2013.
IMF forecasts zero GDP growth in Ukraine in 2013.
WB maintains GDP growth forecast at 1% in 2013.
SandP affirms Ukraine's B/B ratings, outlook remains negative.
Moody's says Ukraine faces downward pressure on sovereign ratings.
Fitch affirms Ukraine at B, revises outlook to negative
Industrial production down 9.3% y/y in May.
Ukraine reports CPI deflation of 0.4% y/y in May.
National Bank of Ukraine lowers discount rate to 7%.
PPI inflation accelerates to 1.9% y/y in May.
Ukraine's foreign reserves down 2.8% to USD 24.5bn in May.
SandP says Ukraine's Fx/gold reserves to contract to USD 20bn by end-2013.
FDI in Ukraine's economy up by 1.3% ytd to USD 55.7bn in Q1.
Ukraine's foreign debt down 2.4% to USD 26.9bn in May.
Gross foreign debt up 0.9% q/q to USD 136.3bn in Q1.
FinMin says public debt not to exceed 30% of GDP in 2013.
State budget deficit up 5-fold y/y in Jan-May 2013
SandP forecasts state budget deficit to reach 5% of GDP in 2013.
Current account deficit shrinks to USD 208mn in May.
Ukraine expects current account deficit to decline from 8.4% to 7% of GDP in 2013.
Merchandise foreign trade deficit down by 40.6% y/y to USD 2.6bn in Jan-Apr.
IMF urges Ukraine to reduce current account and fiscal deficits.

Banking
Moody's maintains negative outlook on Ukraine's banking system
SandP estimates share of problem loans in Ukrainian banks at 20%
Banks assets up 1% m/m in May.
Ukrainian banks post profit of UAH 1.1bn in Jan-May.
Proportion of foreign capital in Ukrainian banking system down 0.4pps to 37.9% in April.

Monetary
Ukrainian exchange trading volume down 42.6% m/m in May.
Volume of trading on Ukrainian PFTS stock exchange down 13.4% in May.

Appendix

List of Tables

Table 1 Financial results of banks as of Apr 1, 2013, UAH thsd, Group 1
Table 2 Financial results of banks as of Apr 1, 2013, UAH thsd, Group 2
Table 3 Financial results of banks as of Apr 1, 2013, UAH thsd, Group 3
Table 4 Liabilities of banks as of Apr 1, 2013, UAH mn, Group 1
Table 5 Liabilities of banks as of Apr 1, 2013, UAH mn, Group 2
Table 6 Liabilities of banks as of Apr 1, 2013, UAH mn, Group 3
Table 7 Assets of Banks as of Apr 1, 2013, UAH mn, Group 1
Table 8 Assets of Banks as of Apr 1, 2013, UAH mn, Group 2
Table 9 Assets of Banks as of Apr 1, 2013, UAH mn, Group 3
Table 10 Equity capital of banks as of Apr 1, 2013, UAH mn, Group 1
Table 11 Equity capital of banks as of Apr 1, 2013, UAH mn, Group 2
Table 12 Equity capital of banks as of Apr 1, 2013, UAH mn, Group 3
Table 13 Banking sector indicators
Table 14 Preliminary results of banks activities
Table 15 BoP, USD mn
Table 18 Monetary indicators

List of Figures

Figure 1 Real GDP growth
Figure 2 Industrial production, % y/y
Figure 3 CPI inflation, % y/y
Figure 4 Discount rate % per annum
Figure 5 PPI inflation, % y/y
Figure 6 Fx/gold reserves, UAH mn
Figure 7 FDI, USD mn
Figure 8 Direct National Plus Guaranteed Debt, USD mn
Figure 9 State budget execution, UAH mn
Figure 10 Current Account, USD mn
Figure 11 Merchandise Foreign trade, USD mn
Figure 12 Banking sector indicators, UAH mn
Figure 13 No of registered banks
Figure 14 Monetary base, Money supply, UAH mn
Figure 15 Lending Rate: Weighted Avg
Figure 16 Deposit Rate: Weighted Avg, %
Figure 17 Forex: NBU: Monthly Avg
Figure 18 UX index
Figure 19 PFTS index

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