Ukraine - Economic Situation July 2007

摘要

The Ukrainian economy has continued to show robust growth, demonstrating a solid immunity to political instability. For January-May, real GDP grew by 7.9 percent yoy. Due to the droughty weather, the grain harvest is expected to be notably lower than previously expected. However, poor agricultural performance is unlikely to have a substantial effect on total GDP growth in 2007. For the first five months of the year, the state budget ran an unusually high surplus for this period due to higher than expected budget revenues and under-execution of budget expenditures. Despite a high fiscal surplus so far, the government resumed issuance of external and domestic debt in June to secure enough funds for the planned budget deficit. The consumer price index keeps reporting double-digit growth; however, the government forecast of 7.5 percent year-end inflation may still be realistic. Ukraine continued to demonstrate very strong export performance this year; however, buoyant import growth resulted in further widening of the merchandise trade deficit. A modest service trade surplus and a larger deficit in the income account caused the current account deficit to widen by almost 70 percent yoy in 1Q 2007. Robust capital inflow covered not only the CA gap, but also helped replenish the gross international reserves of the National Bank of Ukraine. In mid-June, the EU and Ukraine officially started negotiations on a new enhanced agreement.