The volume of Ukraine’s gross external debt increased by $8.8bn during the second quarter of this year and amounted to $148.6bn at the end of the half-year, according to the website of the National Bank of Ukraine (NBU).
“Relative to GDP, the debt increased from 90.5% to 92.7%,” the National Bank noted.
At the same time, the external debt of the public sector for the second quarter of 2023 increased by $8.4 billion to – $84.5 billion (52.7% of GDP), while the debt of the private sector – by $0.4 billion to $64.1 billion (40% of GDP).
As indicated by the National Bank, the growth in the public sector was due to net attraction of $8.8 billion in loans from international partners, including $3.6 billion from the International Monetary Fund (IMF), while the government debt on securities decreased by $0.12 billion.
According to the central bank, the volume of external liabilities of Ukrainian banks decreased by $0.08bn to $1.8bn (1.1% of GDP), mainly due to the reduction of debt on loans by a similar amount.
External debt of other sectors of the economy increased by $0.2bn to $41.3bn (25.8% of GDP). As explained by the regulator, this was due to the growth of external debt on guaranteed loans – by $0.14 billion and securities – by $0.05 billion.
Debt of other sectors of the economy, including intercompany debt, increased by $0.52 billion to $62.3 billion (38.9% of GDP) in the reporting quarter.
Direct intercompany debt of enterprises in direct investment relations increased by $0.28 billion to $21 billion (13.1% of GDP) in the quarter due to the increase in external debt on credits and loans of direct investors by $0.26 billion.
The NBU estimated the increase in private sector debt due to exchange rate changes at $0.4 bln.
The volume of overdue debt of the real sector on non-guaranteed loans (including from direct investors) increased by $0.13bn in April-June and amounted to $25.4bn (15.9% of GDP) at the end of the second quarter. According to the NBU, the share of Cyprus in it is 58.1%. In addition, the shares of the UK increased by 1 percentage point (p.p.), to 9.2%, and the Netherlands – by 3 p.p., to 5.8%.
According to the National Bank, Cyprus at the end of the second quarter remained the main creditor country in terms of the geographical structure of private sector debt on non-guaranteed loans (together with intercompany debt) – 49.2% of the total volume, its share since the beginning of the year increased by 0.4 p.p.
The shares of the Netherlands, Germany and Switzerland increased by 0.1 pp. to 7.3%, 3.0% and 2.6% respectively, while the share of the USA remained at 3.0% and the shares of the UK and Luxembourg decreased by 0.1 pp. – to 10.7%.
The main currency of Ukraine’s external borrowings at the end of Q2 2023 remains the US dollar – 50% of total external debt, but its share decreased by 3 p.p. over the quarter. At the same time, the share of borrowings in euros increased from 31.9% to 33.8%, as well as in SDRs to the IMF – from 9.9% to 11.4%, while the share of external debt in hryvnia decreased by 0.2 p.p. to 1.6%. – to 1.6%.
The volume of short-term external debt by residual maturity for the second quarter of 2023 increased by $1.2 billion and amounted to $40.8 billion as of June 30, 2023.
Meanwhile, general government liabilities that require repayment over the next 12 months increased by $0.9 billion to $3.8 billion due to higher future government loan repayments, including $0.2 billion to the IMF, while central bank repayments decreased by $0.18 billion to $1.3 billion due to lower IMF repayments.
The volume of short-term liabilities of the banking sector remained almost at the level of the previous quarter and amounted to $1.3 bln.
The total volume of real sector borrowings (together with intercompany debt), which are to be repaid over the next 12 months, increased by $0.5bn and amounted to $34.4bn as of June 30, 2023. The National Bank specified that the growth is due to an increase in the volume of future repayments on debt securities by $0.4bn.
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Ukrainian President Volodymyr Zelenskyy, speaking by video link to the participants in the conference on the reconstruction of Ukraine (Rome), called on Italian business to invest in the Ukrainian economy based on new security standards.
As the president stressed, Ukraine and its partners will have to prepare already this year the most ambitious economic project of modern times in Europe, in particular, the project for the reconstruction of Ukraine.
“Europe has not seen such destruction since World War II, which was brought to Ukraine by the Russian Federation. But it was after that war that Europe saw what real reconstruction yields and what growth brings. We are now on the cusp of no less opportunity. There is a demand in the world for new security standards so that every country can defend itself against any manifestation of aggression. We in Ukraine are creating such security standards,” Zelensky said.
The head of state called on representatives of Italian business and investors to join the reconstruction of Ukraine on the basis of new security standards in 5 key areas: energy, construction, technology, access to global markets and cooperation in pharmaceuticals and human rehabilitation.
Speaking of the energy sphere, Zelensky emphasized that now it is necessary to do everything to prevent the enemy from having even a theoretical opportunity to break the Ukrainian energy sector. The answer to this can only be its transformation and decentralization of energy production.
“The more green energy producers, the more resilient the system. The more sources of energy supply, the more reliably each city, community and family is supplied. Italy is one of the leaders in the creation of smart grids. I invite your companies to develop together the Ukrainian networks. Do not forget that in the near future Ukrainian networks will be the EU networks,” he said.
The President also noted that Ukraine has an enormous need to rebuild infrastructure on a new security basis, and therefore he invited Italian companies to plan, design and build together with Ukrainians.
In addition, he called on Italy to invest in the production in Ukraine of military equipment, which it receives from partners, in particular sea drones, UAVs, etc.
Also, according to the President, Ukraine to assist in the processing of its own resources with the subsequent entry into the global market. Which, in turn, will help to replace companies from Russia.
Finally, the last example of cooperation between Ukraine and Italy could be pharmaceuticals and rehabilitation of people affected by war.
Ukraine is a huge market for pharmaceutical products as well. Localization of production in our country gives a huge benefit. But the war has given a new level to this industry – we are talking about people who need rehabilitation after injuries and those whose lives are poisoned by post-traumatic disorders. We will work on this in Ukraine together with the best representatives in the world. Ukraine has a unique experience in defense of the state and people in the conditions of aggression. We invite Italy to build a new security together with us, we invite your business, investment and experience to come to Ukraine now”, – summarized Zelensky.
The U.S. economy will enter recession in the coming months, Jeff Gundlach, head of investment company DoubleLine Capital, said on CNBC.
According to Gundlach, only a rise in unemployment is needed for a recession to begin under current conditions. The Federal Reserve (Fed) will need to take “very decisive” action, he believes, and expects the regulator to lower interest rates this year.
Since March 3, the two-year U.S. Treasury yield has fallen about 100 basis points to 4.078%. Until it recovers, the Fed won’t raise rates, Gundlach believes.
The Fed has been tightening monetary policy throughout the year. As Bloomberg notes, this forces investors to reallocate capital in favor of cash and instruments with yields higher than deposit rates, including Treasury bills and units of money market funds.
Even after the end of the war, 860,000 to 2.7 million Ukrainian refugees may stay abroad, which will lead to a loss of GDP of 2.55 to 7.71%, according to a study of the Center for Economic Strategy (CES).
“According to our calculations, from 860 thousand to 2.7 million Ukrainians may stay abroad. More prone to return are the elderly, people with lower levels of education, as well as those who worked before the war, “- said the experts of the center.
They recalled that in total there were 3.8-4.7 million Ukrainian refugees abroad (except Russia and Belarus) by the end of 2022, and about 1.5 million more in Russia.
According to the survey conducted by Info Sapiens, the ratio of adults to children is 1:1.07. Among adults, women aged 35 to 49 are the most numerous – 42.2%, while men of that age make up 6.4%.
Women 25-34 years old make up 18.5%, men 3.2%, and those 18-24 years old 8.2% and 3.5%, respectively.
According to the survey, at the end of the year 11.3% of refugees aged 35-49 years definitely or rather did not plan to return to Ukraine, 13.1% of refugees aged 18-24 years, 8.2%-8.3% of refugees aged 25-34 years, and 50-65 years.
It is also stated that almost a quarter of the residents left the Zaporizhzhya region, and almost a fifth from Kiev and the Kiev region, while from the western regions – less than 10%.
Among the main reasons for refugees to settle in a new place outside of Ukraine the CEC named the prolongation of the war, the positive attitude of Europeans to Ukrainians, the prospects for children.
In addition, those who left abroad from the war zone may have nowhere to return, so their return depends on the rapid reconstruction of their regions or support to move to other regions of Ukraine.
Stagflation will be a key risk for the global economy in 2023, according to investors who say hopes of a market rally are premature after this year’s massive sell-off.
Nearly half of the 388 respondents in the new MLIV Pulse survey said a scenario in which economic growth continues to slow while inflation remains high will dominate the world next year. A deflationary recession is considered the second most likely scenario, while a recovery with high inflation is considered the least likely scenario.
The survey results signal that next year will again be a difficult one for risky assets after central bank measures to tighten monetary policy, rising inflation and a full-scale war unleashed by Russia against Ukraine triggered the most significant stock market crash since the 2008 global financial crisis, Bloomberg writes. More than 60 percent of those surveyed say investors around the world are still overly optimistic about asset prices.
“Next year is still going to be a tough one,” said Buffalo International Fund portfolio manager at Kornitzer Capital Management Inc. Nicole Kornitzer.
“Definitely stagflation is expected at this point,” the expert notes.
Meanwhile, about 60% of those surveyed expect the dollar to weaken further. That contrasts with the October survey, when nearly half of respondents expected to hold long dollar positions ahead of the U.S. Federal Reserve (Fed) meeting in November.
“The dollar is likely to weaken over the course of 2023,” Cornitzer said. – Perhaps not very significantly, but the trend will probably be downward.”
All investors’ attention is focused on what the Fed will do next, with economic growth likely to come under even more pressure as interest rates remain high for longer. Another risk to the global economy is China’s “zero tolerance” policy to the coronavirus, experts say.
Stagflation (a word combination of stagnation + inflation) is a situation in which economic recession and a depressed economy (stagnation and rising unemployment) are combined with rising prices – inflation.
The invention of the term is attributed to British politician and Minister of Finance of the early 1970s, Ian McLeod. The expression was first used by MacLeod in a parliamentary speech in 1965.
The World Bank predicts the growth of the economy of Uzbekistan in 2022 by 5.3%, according to the updated WB economic review for the Europe and Central Asia region.
Earlier in April, the World Bank expected the country’s GDP to grow by 3.6% this year.
“According to forecasts, Uzbekistan’s GDP growth will slow to 5.3% in 2022 (in 2021 the economy grew by 7%) and will be 4.9% in 2023. Increasing difficulties in the field of logistics (supplies) associated with sanctions against Russia, will slow down the growth of private consumption,” the document says.
At the same time, according to the WB, private investment and exports are expected to grow steadily, and the current account balance of payments will improve, as Uzbekistan continues to benefit from high world commodity prices (gold, copper, natural gas) and increased remittances from labor migrants. .
“Foreign direct investment is not expected to increase in 2022, and the trade deficit will be covered primarily by government borrowing,” the review said.
According to the World Bank, higher commodity export revenues and “slow” government investment spending will reduce the budget deficit from 6.2% of GDP in 2021 to 4.4% in 2022. However, the deficit will be higher than planned (at 3%) due to higher government spending on social protection, health care, education and infrastructure development.
The government is expected to continue to adhere to its own borrowing restrictions. Thus, public debt and total external debt will gradually decrease to 32% and 55% of GDP, respectively, by the end of 2024.
The state budget of Uzbekistan for 2022 included GDP growth at the level of 5.9%, the inflation rate was planned to be reduced to 9%.
Earlier, the EBRD raised its growth forecast for the economy of Uzbekistan from 4% to 5.5%. The ADB forecast for the growth rate of the economy of Uzbekistan for the current year has not changed – 4%. According to the State Statistics Committee of Uzbekistan, in the first half of the year, the country’s GDP increased by 5.4%.
