The Economic section of the Embassy of Ukraine in Brussels
The Ukraine Invest & Trade Office
Wishes you a prosperous and Successful 2020!
We would like to take this opportunity to thank you for the pleasant cooperation in the past year and hope that our paths will cross again in 2020.
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Ukraine’s economy growing faster than expected - NBU
Ukraine's economy grew by 4.1% in Q3 2019 in annual terms, which was driven by higher domestic consumer and investment demand, as well as export growth, according to the press service the National Bank of Ukraine (NBU). "In Q3 2019, Ukraine's economy grew by 4.1% year-on-year (y-o-y), higher than estimated by the National Bank... The NBU expected real GDP growth at 3.5% y-o-y in the third quarter. The main reasons for the higher-than-expected economic growth are higher growth in domestic demand, consumer and investment one, as well as export growth," reads the report. The National Bank noted that compared with the second quarter (4.6% y-o-y), Ukraine’s GDP growth slows down due to weaker indicators of almost all basic activities and financial sector, and under the end-use method - slower growth of household final consumption expenditures and a significant increase in the negative contribution of inventories. Household final consumption expenditure grew by 8.4% y-o-y against 11.8% y-o-y in the previous quarter. This was driven by a steady increase in household income and high consumer sentiment. Consumption in the government sector also grew (by 1.1% y-o-y) due to increase in spending on social protection, defense and others. Investment growth also accelerated.
The growth in gross fixed capital formation made up 13.9% y-o-y in Q3 against 7.9% in Q2. Export growth accelerated to 13.5% y-o-y primarily due to high yield of grain and oilseeds, as well as faster process of harvesting of late grain and oilseeds. On the other hand, import growth slowed down (to 6.2% y-o-y) due to a decrease in imports of coal and oil products. Respectively, the contribution of net exports to real GDP growth for the first time since the end of 2015 was positive (2.2 pp) despite the revaluation trend of the hryvnia.
New Customs Service to be launched on Dec 8
The Cabinet of Ministers of Ukraine has adopted a decision to launch a new State Customs Service on December 8, 2019.
"From December 8, we will begin to work at full throttle! Today, December 4, the Cabinet of Ministers of Ukraine decided to launch the new State Customs Service. This enables the newly created customs service and its regional bodies to begin full-fledged work," the Customs Service reports. Starting from December 8, the State Customs Service will receive the authority of the State Fiscal Service to implement the state customs policy, state policy in the field of combating offenses when applying legislation on state customs affairs. As of November 15, 2019, all regional departments of the new State Customs Service of Ukraine were registered.
As Ukrinform reported, the Cabinet of Ministers on December 18, 2018 decided to create the State Tax Service and the State Customs Service by reorganizing the State Fiscal Service. On March 6, 2019, the government approved regulations on these two services. First Deputy Minister of Economic Development and Trade Maxim Nefyodov won the competition for the post of head of the State Customs Service. On July 5, 2019, the Cabinet of Ministers appointed Nefyodov as head of the State Customs Service.
Ukraine's economy minister names regions with lowest salaries
The average monthly wage in several regions of Ukraine is slightly over UAH 8,000 (about $330), but in one region, it does not even reach this figure, Ukraine's Minister for Economic Development, Trade and Agriculture Tymofiy Mylovanov has said.
"The regions of Ukraine with the lowest average monthly salary are Chernivtsi region – UAH 7,885, Kherson region – UAH 8,020, Ternopil region – UAH 8,098, Chernihiv region – UAH 8,130, and Kirovohrad region – UAH 8,222," he wrote on his Facebook page.
However, he did not specify what period these figures reflect. The average nominal wage in Ukraine in October 2019 was UAH 10,727, or 16.4% more year-over-year.
Cargo handling in Ukrainian seaports reaches 150 mln tonnes for first time in past 11 years
The volume of cargo handling in Ukrainian seaports has reached 150 million tonnes for the first time in the past 11 years. Infrastructure Minister Vladyslav Kryklii wrote about this on Facebook. "Cargo handling in Ukrainian seaports for the first time in the last 11 years has reached the mark of 150 million tonnes. Such a volume had been recorded before the crisis in 2008," he wrote. Kryklii added that 75% of this volume accounts for exports of products of Ukrainian enterprises. At the same time, the share of agro-industrial products in the transshipment reaches 41%, products of the mining industry (ore) - 23%.
"A record-high volume of transshipment is not only the achievement of manufacturers, carriers, stevedores and port workers - it is a new challenge for the whole industry," the minister wrote. He stressed that the transport infrastructure should be ready to cope with new tasks and that the Infrastructure Ministry knows about problematic issues in logistics and has started to resolve them. As Ukrinform reported, Ukrainian ports handled 135 million tonnes of cargo in 2018, up 2.6 million tonnes from 2017.
Exports of grain and leguminous crops grew by almost a third – experts
Between July 1 and December 13, 2019, Ukraine exported 27.36 million tonnes of grain and leguminous crops, which is 32.9% more than in the same period last year, UkrAgroConsult consulting agency has reported. “Ukraine since the beginning of the marketing year 2019/2020 (July 2019 -June 2020) as of December 13, 2019 exported 27.36 million tonnes of grain and leguminous crops, which is 32.9% more than on the same day of the past MY,” the report says. In particular, over the reporting period, wheat exports reached 14 million tonnes. Corn exports made up 9.4 million tonnes, and barley exports – 3.6 million tonnes. As of December 13, 2019, the export of wheat flour to foreign markets amounted to 168,800 tonnes. As Ukrinform reported, Ukraine in the 2018/2019 MY exported record 50.4 million tonnes of grain and leguminous crops, which is 23% more than in the 2017/2018 MY.
Food processing and IT most attractive for export in Ukraine
Food processing and IT are the most attractive sectors for export in Ukraine.
"Not privatization itself is important as it is not an end in itself. The jobs are more important and these are investments. The more enterprises send goods for export, the more orders we will receive, which means better relations in markets which we cannot reach yet because of competition. The better support of Ukrainian exporters is, the greater is the support of investors," Minister of Economic Development, Trade and Agriculture of Ukraine Tymofiy Mylovanov told reporters when visiting Turboatom JSC on December 21.
According to him, food processing and IT are the most attractive sectors for export now: "In particular, this includes product programs, software that produces a great effect in combination with industry."
Ukrainian construction industry continues growing
In January-November, 2019, the construction industry of Ukraine grew by 21.3%.
President of the Confederation of Builders of Ukraine Lev Partskhaladze wrote this on his Facebook page. “The construction industry continues to show steady growth. Over the eleven months, the growth made up 21.3%. These are good results and we hope that at least there will be no decline at the year-end,” he wrote. The index of construction made up 121.3% compared with the previous year. The index of construction of buildings reached 116.8% (residential buildings – 102%, non-residential buildings – 130.5%). The index of engineering facilities made up 125.5%. Construction works were carried out for a total sum of UAH 150.1 billion. New construction, reconstruction, and technical re-equipment made up 75.2% of the total volume of completed construction works, major and current repairs – 16.9% and 7.9%, respectively. The leaders in performance of construction works were Dnipropetrovsk region (UAH 16.8 billion), Odesa region (UAH 14.2 billion), Kharkiv region (UAH 12.9 billion) and the city of Kyiv (UAH 35.5 billion).
Ukraine retains positions in world steel rating
Ukraine retained 10th place in the ranking of the world's largest pig iron producers and 13th place in the ranking of the world's largest steel producers during January-November 2019, according to the World Steel Association.
"Ukraine ranks 10th among 40 pig iron producing countries. [...] Ukraine ranks 13th among 62 steel producing countries," the Ukrmetalurhprom Association reported.
According to worldsteel, 1.24 billion tonnes of pig iron was produced in the first 11 months of 2019, or 2.28% more than in the same period of 2018. China remains the world's largest pig iron producer (738.9 million tonnes; an increase of 5.05% year-over-year). The share of Chinese pig iron in world production in January-November 2019 was 59.6%.
The positions of other leading countries have not changed. Among the top five pig iron producing countries in the first 11 months of 2019 were India (101.2 million tonnes; up 3.85%), Japan (68.9 million tonnes; down 3.2%), Russia (46.1 million tons; down 2.5%) and South Korea (43.6 million tons; up 1.3%). Ukraine ranks 10th among 40 world pig iron producers (18.46 million tonnes; down 1.45%). World steel production in the first 11 months of 2019 amounted to 1.68 billion tonnes, which was 2.7% more than in January-November 2018. According to the State Statistics Service, Ukraine in the first 11 months of this year produced 18.4 million tonnes of pig iron (1.3% less than in the same period last year) and 8.7 million tonnes of semi-finished products of non-alloy steel (up 2%).
The Ukrainian government has transferred 530 state-owned enterprises for privatization.
Prime Minister Oleksiy Honcharuk wrote about this on his Telegram channel.
"The government has transferred 530 state-owned enterprises for privatization. Over almost four months more state-owned facilities have been transferred for privatization than over all 28 years of independence. This will attract investments in some state-owned enterprises and increase salaries of employees," Honcharuk wrote.
He added that the total balance of assets agreed for privatization reaches over UAH 12 billion and transparent auctions through ProZorro.Sale will be launched in 2020.
As Ukrinform reported, the Verkhovna Rada in October 2019 approved the law cancelling the list of objects that are not subject to privatization. The document introduces amendments to the law of Ukraine on privatization of state and municipal property on determining the criteria for objects that are not subject to privatization. In particular, the state property objects located in the temporarily occupied territories are not subject to privatization until the full restoration of Ukraine´s constitutional order in these territories.
President Zelensky on new gas transit contract: Ukrainian GTS to be given full load
Ukraine and Russia have signed a five-year gas transit contract: 65 billion cubic meters will be transited in 2020 and 40 billion cubic meters of gas will be transited annually from 2021 to 2024.
"Ukraine has signed a gas transit contract for five years, during which we will receive at least over $7 billion. The parties can extend the contract for another ten years. The Ukrainian GTS will be given a full load, which means energy security and welfare of Ukrainians! The minimum guaranteed volume of transited gas is 65 billion cubic meters for the first year and 40 billion cubic meters for the next four years. Actually, we can transit bigger volume," President of Ukraine Volodymyr Zelensky posted on Facebook.
According to CEO of Naftogaz of Ukraine Andriy Kobolyev, three contracts were signed:
- The interconnection agreement between the Operator of the Gas Transmission System of Ukraine (OGTSU) and Russia’s Gazprom – the document that defines technical regulations and rules of interaction between the operators of adjacent networks. Similar agreements were also signed with Moldova, Romania, Poland, Hungary, and Slovakia.
- The agreement on the organization of transit between Naftogaz and Gazprom. It regulates the terms of certain volume of gas transited via the Ukrainian GTS in the next five years. Gazprom or another company may pump additional volume during or after this period. The agreement defines the volume of gas transit that Naftogaz is ready to ensure.
- The settlement agreement by which Naftogaz and Gazprom recognize the settlement of mutual claims under the 2009 contracts. Gazprom transferred $2.9 billion to Ukraine on December 27
In addition, Deputy Justice Minister of Ukraine Ivan Lishchyna informed that Ukraine and Russia had signed the settlement agreement regarding the fine of the Antimonopoly Committee of Ukraine to the tune of UAH 172 billion.
As reported, the representatives of NJSC Naftogaz of Ukraine and Russia’s Gazprom met in Vienna on December 26 to start negotiations on the terms of gas transit contracts. At the same time, Executive Director of Naftogaz of Ukraine Yuriy Vitrenko emphasized that the fact of negotiations did not mean any concessions on part of Ukraine. He informed that both sides had prepared their draft contracts, but only one set would be signed finally.
The current gas transit contract between Naftogaz and Gazprom expires on December 31, 2019. The representatives of the European Commission, Ukraine and the Russian Federation at the talks in Minsk on December 20 reached a final agreement on fundamental points of Russian gas transit to Europe through the territory of Ukraine.
At a briefing on December 21, Energy and Environmental Protection Minister of Ukraine Oleksiy Orzhel said that Naftogaz and Gazprom would sign a new five-year agreement on transit of Russian gas to Europe through Ukraine, with the possibility of extension for another 10 years. The transit volume will reach 65 billion cubic meters in the first year, and 40 billion cubic meters in the next four years. Earlier, NJSC Naftogaz of Ukraine, Ukrtransgaz JSC and Main Gas Pipelines of Ukraine PJSC signed the agreement on the establishment of a joint working group with five leading European operators interested in supporting the process of unbundling and further involvement in the management of the Ukrainian GTS. The working group includes GRTgaz SA (France), NV Nederlandse Gasunie (the Netherlands), Snam SpA (Italy), Eustream (Slovakia) and Fluxys SA (Belgium).
