For a nation that has seen mostly gloomy economic news in recent years, the storm clouds may start to lift in 2016. Too many explosive variables exist to make any kind of prediction: Russia’s war could heat up and commodity prices could continue sinking. Moreover, Ukraine’s political leaders still have done nothing to instill investor or public confidence in the nation’s rule of law -- including its judicial system, from prosecutors to judges and police investigators. Additionally, while the banking sector is being purged of its weakest and most corrupt elements, no one has been prosecuted or gone to jail for bank fraud. Lending, meanwhile, remains at a standstill. Borrowers are turned off by high interest rates. Lenders are turned off by a lack of creditor rights. Moreover, even under optimal circumstances, Ukraine’s official gross domestic product in 2016 is expected to be less than $100 billion, only a slight increase. And much of this economy will stay in the shadows.
Making banking progress
National Bank of Ukraine Governor Valeria Gontareva said last year that the clean-up stage of reforming the banking sector is over, while the reset stage has begun this year. The central bank’s goals include restraining inflation to 12-14 percent, restoring public trust in banks and strengthening creditor and consumer rights.
Less from Russia, more from EU
Ukraine has eliminated Russia as the nation’s chief natural gas supplier, replacing it with imports from the European Union through reverse gas flows. Last year, EU gas imports doubled over the previous year, while Russian supplies more than halved to just 6.1 billion cubic meters.
A better cushion
Ukraine’s international reserves rebounded to $13 billion in 2015 thanks to International Monetary Fund lending, the first annual increase since 2010, giving Ukraine some help in reviving an economy shrunk by Russia’s war in the Donbas and annexation of Crimea. Another $4 billion in Western, including IMF, credit should be coming Ukraine’s way in 2016 as long as its political leaders meet fiscal guidelines and enact anti-corruption measures.
