Ukraine Shows Signs Of Recovery

KIEV, Ukraine -- One of the world’s most depressed economies is showing tentative signs of a recovery. After a 25 per cent annual fall in Ukraine’s gross domestic product, there are indications of a rebound in steel production and good prospects for a bumper harvest this year, according to a senior presidential economic policy aide.
“We certainly have a tendency towards stabilisation under way, with steel exports picking up in recent months,” Oleksandr Shlapak told the Financial Times in an interview. “And, thank God, we are expecting another big harvest after a record last year.”As one of the world’s leading steel, grain and chemical exporters, Ukraine’s fortunes are heavily dependent on international commodity demand.Mr Shlapak said industrial production and steel exports – Ukraine’s main sources of hard currency – had risen since February, helped by sharp devaluation of the hryvnia.It was unclear, however, whether the positive data amounted to a sustainable improvement, or a temporary rebound from an artificially low base, added Mr Shlapak.Kiev halted gas deliveries to industry to keep domestic heating running after Russia cut off natural gas supplies in January. Industrial output contracted 16 per cent month on month in January as the energy crisis exacerbated the effect of waning demand for steel.“We are expecting improvements in the coming months, but it’s hard to say if it is sustainable. Much depends on global demand and other world factors,” said Mr Shlapak.Confidence in Ukraine has also been undermined by the bitter rivalry for power between Viktor Yushchenko, the pro-west president, and Yulia Tymoshenko, prime minister, who has looked to Moscow for support and has sought a $5bn (€3.8bn, £3.4bn) Russian loan.Mr Yushchenko’s camp says GDP contracted 25 per cent in the first quarter, compared with a year earlier, but Ms Tymoshenko’s government has delayed publication of the figures.Mr Shlapak accused her of “purposefully concealing” bleak figures for fear that they would further undermine confidence.Some positive data have, however, been published. Steel exports rose 15.3 per cent in the first quarter of 2009 compared with the last three months of 2008.A survey by the market research group GfK Ukraine suggests that after months of sharp decline, consumer confidence has been inching upwards since February. “We think that consumer sentiment reached its bottom in February and that the population’s worst fears are probably behind them,” said Maryan Zablotskyy, an analyst at Erste Bank in Ukraine.Confidence in Ukraine could be further boosted on May 13, when the International Monetary Fund’s board reviews a $16.4bn loan granted to Kiev last autumn.The first tranche of $4.5bn helped to stabilise Ukraine’s troubled banking sector, but the disbursement of further instalments had been frozen as a result of political bickering and concerns over fiscal prudence.Citing improvements by Ukraine’s “resilient” economy and government, an IMF mission visiting Kiev last month recommended unlocking the loan.Last month, the IMF forecast Ukraine’s economy would contract by 8 per cent this year. Mr Shlapak says the fall in GDP could range from 4-15 per cent.