The economy, which shrank by about a fifth since 2013, grew by 0.7% in the third quarter, relative to the second. Consumption started to grow and firms are hiring again - the unemployment rate has fallen from 11% to 9% in recent months. The government’s finances also look much more healthy because of dramatic spending cuts, and the budget is in surplus so far for 2015.
The National Bank of Ukraine has done a good job of cleaning up the banks. In one-and-a-half years about 60 of the 180-odd banks that existed before the crisis have been shut down and others are being recapitalized.
Yet the Hryvnia, Ukraine’s currency, which has lost 70% of its value over the past two years, is sliding again; government-bond yields are rising. A quarter of outstanding consumer loans and a third of the mortgages are in default. Real wages have fallen by 25% in the past year and high inflation has diminished the value of savings. Significant investment is needed to spur exports, since in the past three years capital spending has fallen by 40%.
At the same time, government's efforts to tackle corruption are not visible. The government has failed to increase the derisory salaries of civil servants, making corruption especially hard to resist. There is a risk that the hugely unpopular government may collapse, possibly opening the doors for a resurgence of pro-Russian parties. For all the improvement in Ukraine’s circumstances, the country’s prospects remain horribly uncertain. Read more at http://www.economist.com
The National Bank of Ukraine has done a good job of cleaning up the banks. In one-and-a-half years about 60 of the 180-odd banks that existed before the crisis have been shut down and others are being recapitalized.
Yet the Hryvnia, Ukraine’s currency, which has lost 70% of its value over the past two years, is sliding again; government-bond yields are rising. A quarter of outstanding consumer loans and a third of the mortgages are in default. Real wages have fallen by 25% in the past year and high inflation has diminished the value of savings. Significant investment is needed to spur exports, since in the past three years capital spending has fallen by 40%.
At the same time, government's efforts to tackle corruption are not visible. The government has failed to increase the derisory salaries of civil servants, making corruption especially hard to resist. There is a risk that the hugely unpopular government may collapse, possibly opening the doors for a resurgence of pro-Russian parties. For all the improvement in Ukraine’s circumstances, the country’s prospects remain horribly uncertain. Read more at http://www.economist.com
