Fitch Ratings has affirmed Ukraine’s Long-term foreign currency Issuer Default Rating (IDR) at “CC”, the agency said in a statement on its website.
“The affirmation of Ukraine’s IDR in foreign currency at ‘CC’ reflects Fitch’s expectations for further restructuring of commercial debt before the end of the two-year break in Eurobond payments in September 2024,” the agency said.
It notes that sovereign foreign debt service will increase to $7.6bn in 2025, large budget deficits over the medium term will increase already high public debt and burden sharing with commercial creditors is a likely condition for continued official sector support.
According to Fitch, Ukraine is likely to opt for a single comprehensive debt restructuring next year. However, if security uncertainty persists, the agency expects an interim step in the form of a further deferral of Eurobond payments, similar to how official creditors have agreed to extend the moratorium on payments until the end of 2026 under the EFF with Ukraine.
It is also clarified that Fitch has affirmed the IDR at “CCC-” in local currency. It explained that the higher rating than that of the debt in foreign currency reflects the greater obstacles to restructuring the debt in local currency, given that only 4% belong to non-residents, while 48% belong to the National Bank of Ukraine and 38% to Ukrainian banks, including half of the state banks.
“We do not see significant international pressure to restructure domestic debt, including due to risks to domestic demand for government debt and confidence in banks. Nevertheless, there is still significant credit risk over the longer term, given uncertainty about the sources of funding for a potentially protracted war and a significant recovery effort,” the report said.
According to it, Fitch’s baseline scenario assumes the war will last until 2024 within its current broad parameters.
“We believe that Ukraine currently has a strategic military advantage, backed by modernized weaponry, Western intelligence, and firm resolve. However, in our core scenario, military superiority is not sufficient for decisive achievement of objectives,” the rating agency pointed out.
It added that there is also a lack of politically credible concessions that could form the basis of a negotiated settlement, which could lead to a very protracted conflict.
“In the longer term, we expect some form of settlement to end the war, although we think a frozen conflict is more likely than a sustained peace agreement,” Fitch wrote.
It predicts GDP will grow by 3.5% in 2023 and 4.0% in 2024 after a 29% contraction in 2022. According to the agency, consumption will recover somewhat on easing fears of a broader military escalation, but investment remains depressed. Fitch believes this year’s planned $14 billion in emergency recovery spending will fall short.
The agency expects the budget deficit this year to rise to 17.3 percent of GDP from nearly 16 percent of GDP (25 percent of GDP excluding international grants) last year because of war-related spending and a reduction in the grant component of budget support.
“We expect the deficit to remain high in the medium term, in part because of huge reconstruction needs and structurally higher defense spending than before the war,” the report states.
The agency adds that it sees greater uncertainty about external financing beyond next year, in part because of potential donor fatigue.
Fitch also predicts that the government debt will rise to 85% of GDP by the end of 2023 and to 94% by the end of 2024, while last year it increased by 30 percentage points (p.p.) to 78.5% of GDP.
According to the agency, the USD/UAH peg will remain in place until 2023, with a moderate depreciation in 2024 as the exchange rate becomes more flexible and exchange controls gradually loosen.
Fitch also forecasts an increase in the current account deficit to a deficit of 1.8% of GDP in 2023 and 3.5% in 2024, from a surplus of 5% in 2022, as imports recover faster than exports.
“Large official sector loans and gradually improving net migration help bolster our forecast of an increase in international reserves to $38.9 billion at the end of 2023, equivalent to 4.8 months of current external payments, above the median for all B-rated sovereigns,” the report said.
Fitch forecasts that inflation will fall to 14.5% at the end of this year and to 12.7% on average in 2024 from 15.3% at the end of May and 26.6% last year. According to the agency, the National Bank will lower the discount rate by 5 p.p. – to 20%, but the risks are still skewed upwards, including the consequences of the Kakhovka dam collapse.
The grain harvest in Ukraine this year is expected to be about 46 million tons, which is 5-7% less than last year, said First Deputy Minister of Agrarian Policy and Food Taras Vysotsky.
“As of today, there is a weighted average forecast: it is expected that the grain will be harvested about 46 million tons. This, unfortunately, is less than last year. The decrease is about 5-7%,” he said on national telethon Monday.
At the same time, Vysotsky noted that domestic consumption of grain is 18 million tons.
“Therefore, even collecting 46 million tons, it is still 2.5 times more than the domestic need, respectively, there is no risk for shortage of grain for domestic purposes today,” – said the first deputy minister.
As previously reported, in mid-March, the Ministry of Agrarian Policy predicted a reduction in the total gross yield of grain and leguminous crops in the season of 2023 to 44.3 million tons against 53.1 million tons in the previous season.
Australian Prime Minister Anthony Albanese announced another package of military support to Ukraine worth 110 million Australian dollars (about $74 million), local media reported.
The new package will include 70 pieces of equipment, including 28 M113 armored vehicles, 14 special-purpose vehicles, 28 MAN 40M medium trucks and 14 trailers.
Kiev will also receive a significant supply of 105mm artillery shells.
In addition, Canberra will provide 10 million Australian dollars to the United Nations to meet Ukraine’s humanitarian needs.
The prime minister stressed that Australia would support Ukraine for as long as necessary.
The Ministry of Agrarian Policy and Food has announced the completion of the sowing campaign, with the forecast for spring grains and pulses exceeded by 4% to 5.672 million hectares.
According to the Ministry’s website, this is 8.5% less than last year and 25.1% less than in pre-war 2021.
Sunflower and soybean plantings amounted to 5.307 mln ha and 1.779 mln ha, respectively, down 5.9% and 3.3% from the March forecast. At the same time, they exceeded last year’s figures, in particular, by 12.9% for sunflower and 46.8% for soybeans.
It is specified that in 2023, the agrarians exceeded the forecasted plantings of peas and corn by 16% and 12%, respectively, having allocated 139.3 thou hectares and 4.043 mln ha for them. The amount of peas planted was 6.3% higher compared to last year, while corn was 12.8% lower.
This year’s buckwheat planting plan was exceeded by 5% to 120.7 thou hectares, and the growth was 60.3% compared to the previous year.
The area under oats is also 2% higher than expected – 150.1 thou hectares, but 5.8% lower than last year.
Farmers slightly missed the forecasts for spring wheat, for which 280 thou hectares were allocated (98% of the plan). However, the area under it is 46.5% higher than in 2022 and 59.1% higher than in pre-war 2021, as winter wheat was sown much less.
The forecast for the current year for spring barley sowing was also not fulfilled, with farmers planting 821.9 thou hectares (79% of the plan), which is 13.6% lower than last year. The situation is the same with millet, under which 51.1 thou hectares were planted, which was 85% of the plan, but it is 3.2% 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).
At the end of March, the Ministry of Agrarian Policy predicted that in 2023 the planted areas of grains and pulses will amount to 10.24 mln ha, down 1.4 mln ha from 2022, while the area under oilseeds will increase by 0.92 mln ha to 8.85 mln ha.
Home prices in Germany fell 6.8% in the first quarter compared with the same period last year, according to the country’s Federal Statistical Office (Destatis).
The rate of decline was the fastest since the data began tracking in 2000.
Home values fell 3.1 percent in January and March compared to the previous three months.
The most likely reasons for the decline in demand from potential home buyers are higher mortgage rates and sustained high inflation. This, in turn, causes a decline in home prices, noted in the report.
In the seven largest cities in the country (Berlin, Hamburg, Munich, Cologne, Frankfurt-am-Main, Stuttgart and Dusseldorf) in the first quarter, the cost of single or two-family homes fell by 10.4% year on year, while apartments fell in price by 6.4%.
The Cabinet of Ministers of Ukraine has allocated 200.6 million UAH for the reconstruction of the Borodyansk social and psychological rehabilitation center.
According to the representative of the Cabinet of Ministers in the Verkhovna Rada Taras Melnychuk in Telegram, the relevant decision was made at the government meeting.
In particular, the Ministry of Veteran Affairs allocated 200 million 633.87 thousand UAH from the fund to eliminate the effects of the armed aggression on the budget program “Measures for psychological assistance, social and professional adaptation, provision of sanatorium treatment and development of sports of war veterans, those who have rendered special services to the homeland, the family members of such persons, victims of the Revolution of Dignity, family members of the deceased (deceased) war veterans, family members of deceased Defenders and Defenders of Ukraine and production for them forms of certificates
As reported, in May the Cabinet of Ministers reallocated UAH 100 million to provide funding for the reconstruction of the Borodyansk center of social and psychological rehabilitation.
