UKRAINE

COUNTRY PRESENTATION

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

General information

Area: 603,700 sq. km

Population: 46.7 M (September 2006, official data), down from over 50 M in the 80s

Population growth rate: - 0.6%

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Political situation

• Orange Revolution in December 2004• Constitutional reform – powers of President reduced. Parliament to name the PM• March 2006 Orange Revolution parties fail to form government• Anti-crisis government headed by Viktor Yanukovich appointed in August 2006• October 2006: President Yuschenko’s party „Our Ukraine” leaves government after dispute on fast-track NATO membership

Politics and economy

• PM Yanukovich considered business-friendly• Good personal relations with Russia• Weaker UAH as a goal to help exporters

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

130

95

50

0

20

40

60

80

100

120

140

2005 Jan. 2006 2007 (exp.)

Gas price shock

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ratings

Fitch BB- / outlook positive (changed in October 2006)

Moody’s Ba3 / stable

S&P BB- / stable

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: real GDP growth/1

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 H1

After a drastic fall in 2005, growth resumes in 2006. In June GDP growth reaches 9.3% year-on-year. Is it sustainable?

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: GDP growth/2

• 2006 growth mainly driven by internal consumption

• Real available household income increases by 20.6% in H1 2006

• Registered umployment falls from 3.1% to 2.9%

• Capital investment growth 15.9%

• FDI inflow USD 2.3 bn (3.7 times increase)

• Gas price increase may endanger robust growth

• One of the highest energy/GDP unit consumption in the world

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: CPI/1

100,0

100,7

101,7

100,3

101,2

101,6

101,0

100,9

100,6100,4

100,9

100,6100,0

102,0

102,6

100,9

100,1100,5

99,6

101,8

101,2

99,7

99

100

101

102

103

січ

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тий

бе

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квіт

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нь

жо

вте

нь

ли

сто

па

д

гру

де

нь

від

со

тки

2005 2006

Monthly CPI growth

Month: 01 02 03 04 05 06 07 08 09 10 11 12

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: CPI/2

• Higher gas prices to lead in jump in inflation by year-end

108,1107,1106,7106,7106,4

105,7105,1

104,4

102,7101,7

109,4

110,3

108,7

105,9

103,8103,8

102,9102,8102,3102,7

101,2

103,0

100

104

108

112

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бе

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квіт

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се

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вте

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сто

па

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де

нь

від

со

тки

2005 2006

Month: 01 02 03 04 05 06 07 08 09 10 11 12

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: External accounts – Trade balance (bn USD)

-4

-3

-2

-1

0

1

2

3

4

5

• Favourable market conditions in Ukraine’s main markets help exports, but increased energy costs and larger internal consuption drive up imports

• In H1 2006 C/A deficit reaches 0.9 bn USD (vs 2.2 bn surplus in H1 2005), BoP deficit 1.1 bn USD (vs. 1.98 bn surplus in H1 2005)

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: External accounts – Current account (in % of GDP)

5,8%

11,3%

-3,0%

2,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

2003

2004

2005

2006

f

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

-5

-4

-3

-2

-1

0

1

2

2003

2004

2005

2006e

Ukraine: Budgetary situation

General budget balance to GDP (%)

Fiscal policy remains socially oriented.

Ratio of consolidated budget revenues to GDP reaches 35% in H1 2006, the highest level over last 9 years

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Ukraine: International reserves (M USD)

Record high reserves slightly fall down in H1 2006, but quick growth after August 2006

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Ukraine: FDI and portfolio investments (M USD)

0

5000

10000

15000

20000

25000

30000

01.01.2001 01.01.2002 01.01.2003 01.01.2004 01.01.2005 01.01.2006

Portfolio investment

FDI

Steady groth of portfolio investments, big jump in FDI mainly due to privatisation proceeds

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

-5

0

5

10

15

20

25

30

35

40

Extra

ctive

Food

Light

Timber

Pulp &

Pap

er

Chem

ical

Met

allur

gy

Mac

hine

build

ing

Energy

2001 2002 2003 2004 2005(%)

Growth rates of different branches of industry (2001-2005)

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

11,4%

9,4%

2,5%

12,0%

10,9% 8,1%

42,6%3,1%

Food

Mineral products

Chemicals

Textiles

Wood + paperMetals

Machinery

Others

Exports structure,

January-September 2006

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Exchange rate movements 1996-2005 (UAH/USD)

0,00

1,00

2,00

3,00

4,00

5,00

6,00

96 97 98 99 00 01 02 03 04 05

15th BACEE Country and Bank Conference

14-16 November 2006, Budapest

Exchange rate movements 2004-2006 (UAH/USD)

1 USD = 5.05 UAH (official rate)