The budgeted 3% GDP growth can’t wait
The following year, the Ukrainians will have to tighten the belt. Experts in one voice say — for the domestic economy 2019 may prove to be one of the most challenging in recent times.
“Definitely it will be a disaster for all parameters: from GDP growth and inflation, and ending wages and prices,” — said the head of the Ukrainian analytical center Alexander Okhrimenko.
According to the economist Alexei Kusch, in budget of 3% GDP growth can’t wait. In the best case scenario would be 1-2%, and at worst will come to zero or even go into the negative. Same with inflation — instead the government promised to 7.4% in reality get from 11-12% to 15-17%. The prices for many goods and services will rise even faster, say, bread and meat will rise in price by 20%, — predicts the head of the Association of trade suppliers Oleksiy Doroshenko. Salaries, on the contrary, will freeze — they will increase by 7-10%, that is, the increase will not even cover inflation.
The reasons for the economic collapse a few. First, in 2019 we will have a record of payments on foreign debt. Only in the first quarter will have to pay $ 2 billion. Even with the IMF loan of 1.4 billion dollars lack of money will continue to be felt. Second, the economy is already pushing the campaign. “Freeze all projects, minimized investment. And before the elections, business will wait”, — said the head of the Secretariat of the Council of entrepreneurs under the Cabinet of Ministers Andrei Zablovsky. Some companies went even further. “Already cut production and try to sell the “extra” equipment. Such examples are especially numerous in the food industry,” says Doroshenko.
The payment of external debt will be one of the main attacks on the Ukrainian economy in 2019
Thirdly, the Ukrainian economy will hurt the global crisis, which is inevitable after the recent collapse in world stock markets, experts have little doubt. “A new recession is expensive borrowed money and lower prices for raw materials. Only because of the collapse of prices for grain and metal UAH risks will depreciate by 20-25%,” — said Kusch.
“Country” understood what will happen to the Ukrainian economy, the dollar exchange rate, wages and prices in 2019.
Two steps back
In addition to the budgeted-2019 economic indicators (GDP growth 3%, inflation of 7.4%, etc.) that largely “written” in favor of the IMF, there are still a few official economic forecasts for next year. This, in particular, the consensus forecast Ministry of economic development and financial stability report from the Bank.
For example, in the consensus forecast from the Ministry of economy the GDP growth next year is estimated at 2.9 per cent. But originally the figure was higher. The consensus forecast Ministry of economic development models economic situation for the next three years. And in 2017, trying to see into the future, the experts of the Ministry predicted GDP growth in 2019, at 3.7%. Interesting to see how as the government promised “economic reform” has varied experts predictions.
In the fall of 2017 expectations for GDP growth fell to 3.6% in the spring of 2018 is already up to 3.1% and by December of this year to 2.9%.
In fact, according to Okhrimenko, the GDP will grow at best 2%. Economist Alex Kush, put the figure at 1-2%. And this is the best — if Ukrainian economy is not very hard hit of the global crisis, and the political situation in the country will be more or less stable. When implementing the worst-case scenario the economy will not grow at all or even go to zero.
“A great fortune will at least maintain what you have, not to fall deeper,” says Zablovsky.
And this despite the fact that even 3% GDP growth for Ukraine is very small. “To catch up in the foreseeable future, the countries of Eastern Europe, the same Poland, for example, we need to grow at least 6-7% per year”, — said the expert.
He also says that next year we can expect even greater collapse of investment. This year foreign investors have invested in the Ukrainian economy $ 1.9 billion (almost twice less than in 2016).
In 2019, according to the expectations of the Ministry, this figure will grow to $ 2.5 billion. But the situation is the same as GDP — as you get closer to the date “X” forecasts are becoming more pessimistic. For example, in 2017 it was expected that in 2019, investors will lead to us not less than 3,5 billion. In fact, experts say, we will not get even 2 billion foreign Direct investment may have fallen to its lowest level in 1-1,2 billion dollars. For comparison: according to the forecasts of the national Bank, migrant workers this year will transfer to Ukraine of USD 11.5 billion.
A major risk factor for investors – just two of the campaign in 2019 and unclear political prospects after them.
“Nobody in the business does not understand what will be the configuration of power after the presidential elections in March-April and the Parliament in the autumn. So few investment projects pritormazhivayut,” – said the representative of one of large Ukrainian financial-industrial groups.
It is significant that the consensus forecast of the Ministry, the acceleration of economic growth has now moved to the 2020-2021 years. So, for 2020 it is planned to increase GDP by 4.5%, and in 2021- more than 5%. Foreign investment is expected to grow to $ 4 billion. Will it be possible to achieve such performance, only time will tell.
Dear money and cheap raw materials
According to Alexei Kusch, the main drawback of the official economic forecasts, which give our Agency — they do not account for or consider at a minimum the impact of the Ukraine situation on global markets. Meanwhile, for our resource-based economy, these factors — perhaps the most important. And next year they can hit Ukraine is much stronger than previously expected.
“That the new world economic crisis is inevitable, experts have little doubt. Even always calm of the IMF recently made a statement about the “thickening storm clouds” over the global economy. But the recent collapse in the international exchanges, this only confirmed”, — explained the “Country” Alexei Kusch.
An additional reason for concern is the increase in the discount rate of the Federal reserve. This year it was revised four times already and eventually it grew up to 2,25-2,5%. “If this figure is closer to a 2.75-3%, emerging markets will begin to take shape like a house of cards. Because it means that they borrowed money will be very expensive, and next year the developing countries will have to pay the foreign debt to a record 2.7 trillion dollars. Will suffer in the first place, Argentina, Brazil, South Africa, Turkey and Ukraine,” — said Kusch.
“The trend of rising interest rates remain in the world — with all possible consequences for developing countries. Ukraine is no exception: in October, the government placed sovereign bonds of $ 2 billion with significantly higher yield than the previous year (about 10% — approx. ed.). Given the fact that in 2019, Ukraine should pay off substantial amounts of external public debt, the government will again have to enter the international market, private debt,” — stated in the report of the national Bank on financial stability.
According to the foliage, up to 2.75-3% discount rate, the fed will increase in 2019. “And the fact that the President of the United States, Donald trump turned to Twitter-diplomacy and in every way convince the fed not to revise more than the discount rate, does not solve anything. Unless additional sow panic,” — said the expert.
High discount rate of the Federal reserve — a sure sign that global investors will start to more actively go into “safe haven” in the United States. Other consequences — the decline in commodity prices.
Subject to the iron rule – the higher the rate of the fed (that is, the more expensive dollar), the cheaper the cost of the goods which it was nominated.
This trend, in fact, already traceable in the oil market. In October-November the price has fallen by a third. In the end, instead of the promised $ 100 per barrel, oil fell back to 50 barrels and this is despite the fact that OPEC countries have declared readiness to continue to reduce production.
Next in line — grain and metal, that is, our main export products. Iron ore, according to the NBU, fell from the beginning of the year by 10%. In 2019 the price may fall by 10%. The price of wheat since the beginning of last year to the world markets strengthened (growth up to 15-20%), but next year we can expect a rollback — 7-10%. Corn prices can fall by 5-7%. Most likely depreciate steel — up to 20% — is projected in the report of the national Bank.
“That may create risks to the balance of payments of Ukraine”, — notes the regulator. Although, the NBU found and benefits — will collapse if all commodity markets, it is possible to expect reduction of prices on gas, now Ukraine buys in Europe at record prices up to $ 340 per thousand cubic meters.
“However, it is unclear if feel the relief of ordinary Ukrainians, because for them, on the contrary, we have planned two-stage increase of gas prices by spring of 2019 and the beginning of the next heating season. As a result, heating and hot water can rise by 15-20%, — predicts the head of the tenants Union of Ukraine Alexander Skubchenko.
What will happen to the hryvnia?
The collapse in metal prices and corn can trigger another currency swings in Ukraine. After all, metallurgists and farmers are the main suppliers of dollar in our country (this year they made more than $ 15 billion). So the main question now is the dollar next year. Experts call a variety of numbers. Thus, in the consensus forecast of the Ministry the minimum level specified at the level of 30.5 UAH per dollar, and the maximum — 33 UAH.
Alex Kush said that in a corridor of the hryvnia will be “hanging about” only if nothing extraordinary happens, including the global crisis. But if the recession is yet to begin, plus prices fall in world commodity markets, we can expect the collapse of the hryvnia another 20-25%, that is, theoretically, the rate could jump another 8 UAH, and thus closer to 40 UAH per dollar.
UAH predicts tough year – until the mark of 40 UAH/$
“Don’t even want to think what level will fly out the dollar if I took another and negative internal factors, for example, will worsen relations with Russia or worsen the political crisis on the background of two election campaigns,” says Kusch.
In such a situation, inflation is at 7.4%, which is already “lit” in the budget, looks fantastic low. “I think, in reality, will not be less than 11-12%,” — said Doroshenko. Alexander Okhrimenko, and all others to 15-17% inflation.
Thus increase and prices of consumer goods and services. In this case, as told “the Country” Doroshenko, next year many of the foods on the shelves of Ukrainian stores will be more expensive, than in Europe.
“This year, prices have caught up with European, and the next will be to overtake them. Ukrainians saves only increase import competition, it gives our producers raise prices as much as they would like. But for some product groups the price increase may even survive the inflation,” — said Doroshenko.
Among products which risk to appreciate most of all, he calls sugar and cereals. For example, sugar prices may jump from 25-30% (up to UAH 17-19/kg). The main reason is the decline in production. In 2018, the domestic sugar overdid it and weld too sweet.
In the end the prices fell. In the spring, the farmers decided to correct the error and reduced the beet crops by 12%. In the end, the production of sugar in the new season fell by 18% to 1.7 million tons, — States in the profile of the Association “ukrsahar”. Not less than 500 thousand tons is planned to send for export. So balance in sugar mills it could blow a hole of at least 100 thousand tons.
According to Doroshenko, go up ahead will also be a bread — prices will increase up to 20%. The main reason for growth of prices for flour (for the year plus 16%), as well as increasing current expenditures bakers.
But most importantly, unleashes bakeries — minimal competition with imports, — said Doroshenko. The same reason plus high demand will spur the growth of cereal prices — up to 20-25%.
“We have many kinds of cereals, for example barley, corn, while cheap — to 10 UAH/kg. And the impoverished mass of the population goes to porridge. So next season will be the rise in price of cereals”, — predicts expert. Although he did not rule out surprises.
“Nobody expected, for example, that this year from Russia to us massively lucky buckwheat, and prices will stop,” — he speaks.
In the list of products to be more expensive next year, experts say meat, especially packaged its variety (fillets). “I do not exclude attempts of import to us of the same chicken. It would reduce prices, but not sure that importers are something. In 2018, these attempts failed, because the chicken we have at the level of state policy”, — explained the “Country” Doroshenko, referring to the protection of business interests close to the President owner of the company “Myronivsky Hliboproduct” (TM “Our Ryaba”) Yuriy Kosyuk.
Dairy producers, who are also not against to raise rates, rather this, to not do it, as the demand for their products has fallen to a minimum. “Some factories cut production and sell off equipment,” says Doroshenko. Therefore, according to him, milk, if more expensive, slightly by 5-7%.
While wage growth next year may slow down. First, in contrast to the years 2017-2018, the budget includes relatively modest (less than 10%) increase of social standards.
Second, in 2019, the NBU expects a reduction in the intensity of labour migration that will slow down the growth of salaries. However, based on what are these predictions in the national Bank did not specify. HR, by contrast, predict a rise in the outflow of Ukrainian zarobitchan abroad.
“Moreover, some countries facilitate access to their labour markets (in particular Germany), analyst rabota.ua Tatyana Pashkina.