New York-headquartered financial giant Morgan Stanley, which manages a client asset portfolio of $1.9 trillion, may be considered one of the rare optimists this year about Ukraine. It predicts only a four percent drop in the nation’s economy.
Others, including Moody’s international credit rating agency, expect a drop of up to 10 percent.
Igor Mityukov, managing director of Morgan Stanley’s Ukrainian unit since 2008, told the Kyiv Post during a conference organized by the newspaper, that everything depends on the separatist-driven unrest in Donetsk and Luhansk Oblasts.
“GDP will start growing within three months after situations eases,” Mityukov said. Potentially growth may start in 2014’s fourth quarter, if the government manages to settle the conflict in a month – just like Economy Minister Pavlo Sheremeta expects.
Mityukov, 61, served as Ukraine’s finance minister in 1997-2001 and was seen as a potential candidate for the position of a central banker by local business media. He approves of the current government. “I think, the current economic bloc – economy minister, finance minister – is optimal as of now,” he emphasized.
However, additional transparency would help. Working for an institution with one of the world’s best research teams, Mityukov is not happy about the lack of transparency in state statistics. “Some figures remain closed,” he admitted.
Economic progress will take time. “On a macroeconomic level you need three to six months to influence the situation,” Morgan Stanley’s key Ukrainian manager said. “Ukraine should not aim at having a non-deficit budget. The structure of its economy just wouldn’t allow this,” Mityukov commented As long as the economy is growing, a nation can afford to run a deficit.
After assisting the Ukrainian government in conducting U.S.-backed borrowing of $1 billion on the external market in May, Morgan Stanley is looking forward to working with value- added tax bonds that Ukraine wants to issue to cover the debt for reimbursing VAT for exporters.
“Mriya Agro Holding, Myronivsky Hliboproduct are our potential clients,” Mityukov added. Morgan Stanley has no intention to concede the Ukrainian market to local investment houses, especially in the eurobond area.
Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].
