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This presentation is from a webinar held at the Benche on July 6, 2010. A recorded version of the webinar can be found here
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1
WEBINAR: Ukraine – on track again?
6 July 2010
1
Jenny Nordgren
Country Analyst
2
Crisis hit Ukraine hard
Large external imbalances before the crisis
Weak banking sector Collapsing steel industry –
42 % of exports International finance dried up Chaotic politics -20
-15-10-505
1015
2004 2006 2008
Real GDP growth, %
3
IMF loan averted a default
Massive capital flight Sharp FX devaluation Substantial IMF loan of USD
16bn in November 2008
FX and reserves
Reserves (RHS) USD/UAH (LHS)
Source: Reuters EcoWin
04 05 06 07 08 09 10
US
D (
bill
ion
s)
0
5
10
15
20
25
30
35
40
45
US
D/U
AH
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
4
Recovery under way
-35-25-15-55
15
Q108
Q308
Q109
Q309
Q110
Real GDP (YoY)
Industrial production (YoY)
Stronger external demand Higher commodity prices Low base Domestic demand still weak
5
Political Stalemate Ended
Democratic presidential electionsNew majority governmentDecisive actions during the first 100 days in power
– Adopted a budget for 2010– Concluded a gas-fleet deal with Russia– IMF staff level agreement on USD 15bn aid package
6
Positive momentum
Improved investor confidence Upgrade of sovereign rating Sharp reduction of capital outflows Soaring stock market Appreciation pressure on the hryvnia
CDS, 10 Year, Close, USD
Ukraine Hungary Greece
Source: Reuters EcoWin
Oct
08
Jan
09
Apr Jul Oct Jan
10
Apr
Bas
is p
oin
t
0
1000
2000
3000
4000
5000
6000
7
But risks remain - Budget
-10
-8
-6
-4
-2
0
2004 2006 2008 2010 2012
Budget balance, % GDP
Sharp widening of the fiscal deficit 2010 Budget unrealistic Large corrective measures
needed
Source: World Bank, July 2010
8
But risks remain - Energy
Energy sector reform – IMF conditionRaise domestic natural gas pricesImprove Naftogaz’s financial positionSocially and politically challenging
9
Large refinancing needs
High external debt Mainly owned by the private
sector Large external debt
repayments to IMF 2012-2014 Resumed IMF lending is key
Amortization (USDbn)
0
5
10
15
20
25
2010 2011 2012 2013
IMF
Other multilateral andbilateral creditors
Commercial banks
Other private creditors