Business news from Ukraine

NATIONAL BANK MAY RAISE ITS KEY RATE TO AT LEAST 18%

The National Bank of Ukraine (NBU) may raise its key refinancing rate to at least 18% in September, bankers polled by Interfax-Ukraine say. “The refinancing rate in September may grow by 0.5%, while the increase in the rate will indirectly help ease the pressure on the hryvnia. Following the increase in the refinancing rate, bank deposit and interest rates may grow by 0.5%,” Governor of Bank RwS Vladyslav Kravets has said.
The head of the financial department at Ukrgasbank Viktor Pasternak also predicts that the NBU will raise the key rate in September.
“The National Bank of Ukraine’s increase in the refinancing rate may be within one percentage point. Now the hryvnia is seeing its seasonal weakening, which in turn affects inflation, and an increase in the NBU’s refinancing rate helps curb the inflation,” he said.
According to Pasternak, raising the key rate raises the cost of the hryvnia, but it will not directly influence the exchange rate of the hryvnia.
Head of the investor relations department at Credit Dnepr Bank Andriy Prikhodko also forecasts growth of the refinancing rate.
“The deterioration of financing conditions for Ukraine against the background of the acceleration of the devaluation in August creates prerequisites for raising the refinancing rate, so a small increase in the refinancing rate is possible. A tough monetary policy will increase the profitability and attractiveness of hryvnia instruments, which should reduce pressure on the rate (hryvnia) and inflation. The increased key rate will directly affect the yield of government domestic loan bonds and deposit certificates, the impact on rates on bank deposits and loans will be more indirect and with a certain time lag,” he said.
Governor of Piraeus Bank Serhiy Naumov also forecasts the refinancing rate may increase slightly in September.
“Despite the fact that inflation slowed this summer, inflation expectations are still high, we are entering the autumn period when the exchange rate is growing seasonally and the likelihood of gas price hikes for households is high, so I believe that the NBU can once again consider an increase in the rate. But I don’t think it will be drastic. If the key rate grows, I think rates on both bank deposits and loans will go up, but not immediately and not crucially,” the banker said.

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VOLUME OF PRIVATE MONEY TRANSFERS TO UKRAINE 30% UP – NATIONAL BANK OF UKRAINE

The volume of private money transfers to Ukraine in January-May 2018 increased by 30% compared to the corresponding period of 2017, to $4.5 billion, Head of the Council of the National Bank of Ukraine (NBU) Bohdan Danylyshyn has said. “The volume of private money remittances to Ukraine grew to 8.4% of GDP in 2017 (according to the new NBU methodology). And it continues to grow rapidly this year (in January-May this figure was 30% higher than last year and reached $4. 5 billion),” he wrote on his Facebook page.
According to Danylyshyn, a new wave of labor migration from Ukraine is due to many factors, the most important of which are military aggression, a deep and long-term economic crisis, unemployment.
“The NBU inflation report for January 2018 said that the share of migrants in the population aged 15-70 is 8% … The scale of labor migration in Ukraine has become dangerously high for the future economic prosperity of the country,” he wrote. In his estimation, a strong external migration, including highly skilled workers, together with the population aging is a significant challenge for the state. “For example, the “brain drain,” in particular, means the loss of public resources invested in their education, the narrowing of industry, the deterioration of the business environment,” he said.

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REMITTANCES TO UKRAINE TOTAL $1.2 BLN IN H1 – NATIONAL BANK

The volume of remittances to Ukraine via the money transfer systems in H1 2018 totaled $1.2 billion in the equivalent and from Ukraine – $140 million, the National Bank of Ukraine (NBU) reported on its website. According to the report, over the period remittances inside Ukraine accounted for UAH 69.4 billion.
As reported, the volume of money transfers to Ukraine through money transfer systems in 2017 decreased by 4.4% and amounted to $2.378 billion, from Ukraine – by 18.8%, to $286 million, while within Ukraine it increased by 21.4%, to $4.456 billion.
As of the beginning of July 2018, out of 37 money transfer systems that operated in Ukraine, 31 systems transferred funds within Ukraine and 12 systems provided cross-border transfer services.
The bulk of remittances within Ukraine is provided by systems created by resident non-bank institutions. At the same time, 11 these systems together carried out about 92% of all transfers.

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NATIONAL BANK WANTS TO INVESTIGATE FINANCIAL ACTIVITIES OF ROYAL STANDARD COMPANY

The National Bank of Ukraine (NBU) has asked the law enforcement agencies to investigate into activities of Royal Standard LLC, which attracted funds of depositors at high rates – 24-33% per annum in hryvnias and 18-22% in U.S. dollars, the NBU has reported. “The NBU does not grant licenses for attracting deposits or lending to entities that do not have the status of a bank, while the company has not received these licenses from other financial sector regulators – the national commission for financial service markets regulation and the National Commission for Securities and the Stock Market. Moreover, Royal Standard LLC does not have the status of a financial institution. That is, the company by law cannot attract deposits and issue loans,” the National Bank wrote on its Facebook’s page.
According to the NBU, Royal Standard offers investors to deposit cash directly at the office of the company or transfer it to its bank account, and the interest is promised to be paid to a bank card, the details of which are specified in the contract. As a guarantee of the deposit with the depositor, a pledge of rights to movable/immovable property is concluded, whereby the depositor receives a security deposit for property worth twice more than the value of the deposit. “People are explained that, in addition to accepting deposits, the company also provides loans to other persons securing them by property, namely, the rights to this property are transferred to depositors as a guarantee of the deposit. Market value and the existence of this property raise doubts,” the National Bank said.

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NATIONAL BANK ESTIMATES GDP GROWTH IN Q2, 2018 AT 3.2%

The growth of Ukraine’s gross domestic product (GDP) in the second quarter of 2018 slightly accelerated, to 3.2% from 3.1% in the first quarter, the National Bank of Ukraine said in the July inflation report. “In Q2, 2018, Ukraine’s economy kept growing. The high business expectations of companies were evidence of sustained growth in investment activity. The further increase in personal income fueled consumer demand. Overall, real GDP growth in Q2, 2018 is estimated at 3.2% year-on-year,” reads a report on the central bank’s website.
The steady rise in consumer demand was propelled by stronger household income (wages, pensions, remittances). The latter supported the high growth rates of retail turnover, the NBU said.
“As in Q1, the disruption of ties with the non-controlled territories last year had an impact on the pace of economic growth. As a result, gross value added in the metallurgy, mining industry, and energy sector kept growing despite being held back somewhat by repairs at several large enterprises of the mining industry and metallurgy,” the report says.
As reported, a week earlier the National Bank confirmed the forecast for Ukraine’s GDP growth in 2018 and 2020 at 3.4% and 2.9% respectively, but worsened expectations for 2019 from 2.9% to 2.5%.
In the inflation report, the NBU also confirmed the inflation forecast for the current year at 8.9%, but improved the forecast for underlying inflation to 7.1%.
The growth of Ukraine’s economy in 2017 accelerated to 2.5% from 2.3% a year earlier with the increase in inflation to 13.7% from 12.4%.

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NATIONAL BANK OF UKRAINE SEES 8% DECREASE IN ASSETS IN H1, 2018

The assets of the National Bank of Ukraine (NBU) as of July 1, 2018, amounted to UAH 942.724 billion, which was 8.2% less than at the beginning of the year.
Such financial indicators were published by the central bank in the parliamentary edition Holos Ukrayiny (the Voice of Ukraine) on Friday, July 20.
The amount of non-resident securities, which are part of the NBU’s assets, shrank most noticeably: by 10.1%, to UAH 372.725 billion, while holdings and special drawing rights (SDR) decreased by about 61%, to UAH 23.807 billion.
At the same time, the amount of funds and deposits in foreign currency and banking metals almost doubled, to UAH 49.806 billion.
In the structure of the NBU’s liabilities, the amount of obligations to transfer profits to the budget, fell by 85.2%, to UAH 6.614 billion, the amount of assets of government and other institutions fell by over 54.7%, to UAH 25.135 billion, while the liabilities of the National Bank before the International Monetary Fund shrank by 12.4%, to UAH 180.660 billion.

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