In 2018, the dollar equivalent of Ukraine’s GDP will be $130.5 billion. The growth of 16.8% is mainly due to the positive dynamics of commodity prices. Net raw materials export of Ukraine in 2018 will total $9.3 billion, compared to $7.1 billion in 2017 (mainly due to the increase of agricultural exports by $1.8 billion). In 2019-2021, growth rate of dollar GDP will slightly decrease – on average to 12.1%. At the same time, real GDP growth rates will rise to an average of 3.7%, and the rate of inflation will slow from the current 15.6% to only 11.3%. The change in the structure of GDP growth is primarily due to the expected slowdown in the growth rates of prices for energy products and metals, as well as the further implementation by the National Bank of Ukraine of a policy to reduce annual consumer inflation to 5%.
The reduction of political risks after the elections in 2019 will significantly improve the business climate, which compensates for the potential reduction in the dynamics of growth of raw export earnings. In parralel with presidential and parliamentary elections scheduled for 2019, there has been a decrease in investments and an influx of election-related funding in the amount of $2-2.5 billion and a corresponding growth in demand. The the economy will be able to maintain positive dynamics of real GDP (+3.9%) growth. The dollar equivalent of GDP next year will grow by 12.6% – to $147 billion.
In 2019-2021 Ukraine will be able to maintain a positive inflow of currency, which on average will be $2.8 billion per year. The high level of payments on government debt (an average of $7.4 billion) and the increase in consumer imports ($4.4 billion over the year) will be offset by an increase in net exports of raw materials and further refinancing of external public debt, including through the extension of cooperation with the IMF .
The baseline forecast indicates this will help maintain exchange rate stability, if the National Bank continues the active policy of expensive money and the real yield of the government bonds does not decrease – the weighted average rate in 2019 should not exceed the level of UAH 29/1 USD. Due to the increasing volume of carry trade with short-term government bonds, seasonal currency fluctuations will be much higher than in 2016-2017.
Quantitative summary of the future of the Ukrainian energy sector is as follows:
- – in the next 15 years, the share of renewable energy in the energy balance will increase fivefold – to 25%.
- – the share of coal will be reduced by 2.5 times – up to 13%.
- – the share of gas and nuclear power in the consumption of primary energy will remain at approximately the current level — 30% and 25%, respectively.
- – the share of petroleum products will show a significant decrease – to 7%
In 2019, an increase in the volume of green energy production by 61% is expected. The increase in total electricity generation and its exports will be 2.8% and 1.9%, respectively. Despite the falling trend in the share of coal in the energy balance of Ukraine, in 2019 production is expected to increase by 0.6%. At the same time, the role of coal in the energy sector will continue to be replaced by green energy. But the coal industry will continue to occupy a significant place in the Ukrainian energy sector – until about 2035, primarily for thermal generation, which performs an important function of power maneuvering.
The introduction of daily gas balancing in 2019 and the resulting reduction in blue fuel losses in the gas transportation system can reduce the level of prices for natural gas for industry by 15%. Also, the introduction of electronic auctions for issuing special permits for subsoil users contributes to an increase in oil and natural gas production in the next year by 1.8% and 3.8%, respectively.
Domestic production of petroleum products will continue to decline – by 7% in the 2019. Projected increase in prices for diesel fuel will be 14%. The largest increase in the segment of petroleum products will show liquified gas, prices for which are expected to increase 16%.
Full video of the Economic Lecture Hall 2018 can be viewed here.