Dragon Capital investment company, taking into account the increase in exports of raw materials through the sea corridor, a stable energy situation and a good harvest, improved its forecast for economic growth in 2023 from 4.5% to 5.2%, but kept it at 4% for 2024, the company said in a press release on Friday.
“Our updated estimate is that real GDP will grow 5.0% year-over-year in the fourth quarter of 2023, from the 3.0% we previously estimated,” the company said in a statement.
Its analysts estimate that Ukraine exported about 4 million tonnes of commodities through the new sea corridor in November, from 2 million tonnes in October. At the same time, agricultural goods accounted for about 60-70%, and the remaining share was occupied by the export of iron ore and steel. This dynamics contributes to the revitalization of related sectors, in particular freight transportation and trade, contributes to the recovery of ore production and metallurgy products, and also improves the financial indicators of agricultural enterprises, reducing risks to the harvest in 2024.
Dragon Capital, taking into account the latest data on yields of major agricultural crops, has improved its expectations for the harvest of grains and oilseeds this year from 77 million tonnes to 80 million tonnes (11% more year-over-year).
At the same time, the investment company said that an unexpected and unfavorable event was the blockade of the main crossing points of the Ukrainian-Polish border by Polish truckers in early November, which will have a limited adverse impact on economic activity.
Among the downsides of the blockade of the Ukrainian-Polish border are a decrease in state budget receipts, losses for manufacturers oriented towards the EU market, mainly in the food industry, woodworking and production of automotive electronics, a shortage of certain energy materials such as LPG, a delay in volunteer assistance for the front and financial losses of enterprises due to queues.
At the same time, Dragon Capital said, since the import of goods from the EU to Ukraine by road exceeds exports by $1.1 billion per month, the blockade leads to a reduction in the foreign trade deficit, which in recent months has fluctuated in the range of $2.8-3.0 billion per month.
“Due to the reduction in imports, some Ukrainian manufacturers of consumer goods are gaining a temporary competitive advantage,” the company added.
Speaking about the 4% forecast for economic growth next year, Dragon Capital named the partial restoration of exports by seaports as one of its key drivers and, accordingly, an increase in production in related sectors (ore mining, metallurgy, freight transportation, domestic trade). “The development of the domestic defense industry would also contribute to the economy,” the company said.
At the same time, the investment company said that economic recovery in 2023-2024 will not compensate for the 29% decline in 2022 caused by the consequences of the full-scale Russian invasion of Ukraine, and real GDP in 2024 will remain 22% below its pre-war level.
“At the same time, nominal GDP in U.S. dollars could reach its pre-war level of $200 billion as early as next year due to relative exchange rate stability and high average annual inflation,” Dragon Capital said in the press release.
The company maintained its inflation forecast for this and next years at 6% and 8%, respectively, with the National Bank’s key policy rate unchanged at 15% after its expected reduction from 16% at the next meeting on December 14.
Dragon Capital also noted the importance of financial assistance from partners, pointing out that if there is a shortage, the government will have to turn to monetization of the budget deficit, which will decrease next year from 25% of GDP to 21% of GDP, or to increase the tax burden.
“We expect international partners to approve new economic support packages for Ukraine and provide about $40 billion in direct budget funding in 2024, although a delay in the release of funds is possible early next year,” the company said.
The company’s analysts expect that, subject to such external revenues, the National Bank’s gold and foreign exchange reserves will begin to gradually grow and reach $45 billion by the end of the year.
Dragon Capital kept its exchange rate expectations unchanged – UAH 37.30/$1 on average for 2024 and UAH 39.00/$1 at the end of the year.
The Verkhovna Rada has amended the Criminal and Criminal Procedure Codes of Ukraine to criminalize smuggling of goods and excisable goods, which is one of the conditions for the last tranche of the EU’s EUR 1.5 billion macro-financial assistance to Ukraine.
According to MP Yaroslav Zheleznyak (Holos faction), the committee’s version of the draft law was adopted, which was amended in accordance with the letters from the Ministry of Finance that the business insisted on.
“1) It is proposed to raise the thresholds for smuggling 5 times. 2) The thresholds for excisable goods are to be raised by 2 times. 3) The entry into force (criminalization) of commodity smuggling is postponed until mid-2024. As I said, this is the deadline under the (memorandum with the) IMF on the BES reboot,” the MP listed the changes.
He added that the numerous wishes of the business community have also been taken into account, and that actions can only be classified as a crime if there is intent.
“Possible cases of prosecution under ‘smuggling’ articles for submitting documents with false information have been significantly limited – in the amended version, they must be the basis for the movement of goods, be subject to mandatory declaration under customs law, and have an impact on determining the amount of customs payments or compliance with non-tariff regulation measures,” Zheleznyak said.
During the voting, no amendments were made to the text submitted by the committee to the Rada for the second reading, but the text itself is not yet available on the parliament’s website.
According to the representative of the relevant committee, Oleksandr Bakumov (Servant of the People), the threshold for criminal liability for smuggling is set at UAH 6.71 million, which is 50 times higher than in the draft law adopted as a basis (UAH 113.5 thousand – IF-U). He added that the threshold for smuggling excisable goods (except for electricity) has been increased by “thirty-three and three and a half times” compared to the original draft (UAH 56.75 thousand).
Members of the European Solidarity and Batkivshchyna parties, who criticized the draft law, called the main problems of the law the presence of law enforcement agencies in the customs control zone with the addition of the Bureau of Economic Security (BES) and the unresolved problems that led to the adoption of the law on smuggling decriminalization in 2011.
“Ukraine is the only country in Europe and in the World Customs Organization whose customs authorities are not vested with pre-trial investigation functions… We could have left only what is transported outside the customs posts to be considered smuggling,” says MP Nina Yuzhanina (European Union). According to the current legislation, only the illegal transportation of cultural property, poisonous, potent, explosive substances, radioactive materials, weapons or ammunition, parts of firearms, as well as special technical means of covertly obtaining information is considered smuggling.
The outbreak of hepatitis A has been eliminated in Vinnytsia region, said Ihor Kuzin, Deputy Minister of Health of Ukraine, Chief State Sanitary Doctor.
“The active phase of the outbreak of viral hepatitis A in Vinnytsia region is over,” he wrote on Facebook on Friday.
At the same time, Kuzin noted, “isolated cases will be recorded for the next few months, given that hepatitis A is a disease with a rather long incubation period.”
According to him, 333 cases were laboratory confirmed between October 16 and December 7: 30 patients are currently undergoing treatment, 267 have been discharged.
“Currently, doctors are detecting ‘secondary’ cases of infection among relatives and friends of patients who did not want to get vaccinated for free,” Kuzin said.
Among the reasons for the outbreak, experts identify asymptomatic course of the disease among market and food production workers, as well as insufficient disinfection of water supply networks.
The Verkhovna Rada has appealed to the European Union member states and EU institutions to support the opening of negotiations on Ukraine’s accession to the European Union. The relevant resolution No. 10315 was voted for by 292 MPs at the plenary session of the Verkhovna Rada on Saturday, said Oleksiy Honcharenko, a member of the European Solidarity faction.
“The Verkhovna Rada appeals to the national parliaments and governments of the European Union member states, the EU institutions and calls… to support Ukraine’s aspirations to join the European Union by adopting a decision to open negotiations on Ukraine’s membership in the European Union during the European Council meeting on December 15, 2023,” the text of the appeal reads.
The MPs also called on EU members to increase military assistance to Ukraine both at the national level and within the framework of the European Peace Fund.
As of the end of the first week of December, agrarians in all regions of Ukraine harvested 78 mln tonnes of grains and oilseeds: 57.7 mln tonnes and 20.72 mln tonnes respectively.
As reported by the Ministry of Agrarian Policy and Food, grain and legumes were harvested on the area of 10 mln 433 thsd ha with the yield of 54.7 c/ha.
Compared to the same date a year ago, the total harvest is 12.4% higher, or 8.6 million tons, including 32.3% higher, or 14.1 million tons, of grains and 22.5% higher, or 3.8 million tons, of oilseeds. At the same time, it should be borne in mind that this year corn has been harvested from almost 85% of the area, while a year ago – only 66%.
It is noted that ten regions of Ukraine have already completed the harvest. In other regions, the harvesting of corn, sunflower and sugar beets is nearing completion. The leaders in grain harvesting are the farmers of Vinnytsia region, who have harvested more than 5 million tons of grain. This is followed by Poltava and Cherkasy regions, which harvested over 4 million tons of grain each.
In addition, 11.57 million tons of sugar beet were harvested from 244.6 thousand hectares with a yield of 473 c/ha. Although this year’s yield, unlike grain and oilseeds, is lower than last year, due to the expansion of the area by 39.5%, the harvest is 33.7% higher than last year.
As reported, this season winter wheat plantings amounted to 4166 thou hectares (-834 thou hectares compared to the previous season), winter barley – 536 thou hectares (-255 thou hectares), and rapeseed – 1374 thou hectares (+110 thou hectares).
According to the adjusted forecast of the Ministry of Agrarian Policy, in 2023, farmers will be able to harvest 79.1 mln tons of grains and oilseeds, including 57.5 mln tons of grains and 21.6 mln tons of oilseeds.
In January-November this year, Ukrainian steelmakers cut production of total rolled steel by 7.2% year-on-year to 4.864 million tons, according to preliminary data.
According to Ukrmetallurgprom on Friday, in the first 11 months of this year, steel production decreased by 7.3% compared to January-November 2022, to 5.707 million tons.
Pig iron production during this period decreased by 11.3% to 5.447 million tons.
As reported, in 9M2023, Ukraine reduced production of total rolled products by 17% year-on-year to 3.929 million tons, steel by 16.9% to 4.590 million tons, and pig iron by 19.5% to 4.394 million tons.
In 2022, the country’s steelmaking companies reduced production of total rolled products by 72% year-on-year to 5.350 million tons, steel by 70.7% to 6.263 million tons, and pig iron by 69.8% to 6.391 million tons.
In 2021, the company produced 21.165 million tons of pig iron (103.6% compared to 2020), 21.366 million tons of steel (103.6%), and 19.079 million tons of rolled products (103.5%).
