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Thursday, 26 January 2017 11:19

EBA General Meeting: Ukraine's business climate - global outlook

The European Business Association officially commenced the new business season. We gathered over 400 of our members and media representatives to talk about the most important economic trends for Ukraine in 2017 at the General Meeting "Ukraine's Business Climate - Global Outlook". The EBA Board members from different sectors and industries explained key issues and what to expect in 2017. So, let's find out the main ideas and forecasts from our experts.

Tomas Fiala, EBA President and CEO of Dragon Capital

Macroeconomic trends and reform progress

GDP growth in 2016 surprised on the upside and the final figure will most likely be around 1.8%. Strong output in agriculture (+6.1%), construction (13%), industrial production (2.4%), wholesale and retail trade (4.9% and 4.0%) contributed the most. We expect the economy to accelerate in 2017 and grow by 2.5%.

Ukraine has essentially met all requirements for the next IMF tranche of $1bn (fourth under the outstanding Extended Fund Facility program), to be credited directly to National Bank reserves, while key conditions for the fifth tranche include legislation on pension and land reforms and the creation of the anti-corruption court, the final element in the system of anti-corruption bodies in Ukraine.

In 2016 FDI improved to $3.8bn but the bulk of it was comprised of debt to equity swaps in the banking sector ($2.3bn), which was in need of massive recapitalization after heavy losses. Some $1.5bn was invested in the real sector, and we expect a similar level in 2017, while investment in the banking sector will drop substantially as most large banks are now sufficiently capitalized.

The global economic environment will remain stable and mildly positive for Ukraine.

Completion of three reforms mentioned above (pension, land and anticorruption), remaining on track with the IMF program, and further buildup of FX reserves will remain priority areas for investors to watch in 2017.

Taras Lukachuk, the EBA Vice President, President EEMEA - Jacobs Douwe Egberts

FMCG/Food sector

In the conditions of the new online economy’s development we witness success and booming of Internet marketing. However, economic growth in general is hardly noticeable, because of redistribution of all markets. The FMCG market directly depends on Ukrainians’ purchasing power. Since the latest crisis people have learned not to spend extra money, even on food products. Thus, we cannot see any signs of significant growth in our sector.

In my view, we need to understand that the future of Ukraine is in our hands. We ourselves must lead the way in resolving our internal economic problems, not just relying on foreign experts.

Volodymyr Lavrenchuk, the EBA Vice President, Chairman of the Board at Райффайзен Банк Аваль / Raiffeisen Bank Aval

Banking and Finance sector

Within the previous two years the banking system overcame a crisis period. Nevertheless, in 2016 as a result of the recapitalisation process, which affected the vast majority of banks, we now have a top-20 made up of reliable financial institutions.

One more positive signal is that banks start to trust key data from economists and build their development strategies due to such factors. As for forecasts for the future, I predict the banking sector will become more secure and operationally improved by the end of 2017.

Dmytro Krepak, EBA Board Member, CEO of Visa Ukraine

Electronic Payments sector

In the main international economic ratings, Ukraine trails far behind the EU member states as well as CIS countries. For example, Ukraine ranked in 162nd place in the rating of economic freedom, while Georgia occupied 23rd place. The economic environment should be transparent and free. Only in such conditions will the environment be one of zero tolerance to any corruption.

Maciej Tomasz Zielinski, the EBA Board Member, CEO at Siemens Ukraine

Industrial Equipment sector

Slight growth in my sector started in the second half of 2016. Moreover, the metals industry exited a period of weakness and still demonstrates growth. We have noticed significant activity in the energy sector – there is a lot of cooperation with companies in this area. Industries actively implement automation and new technologies. That is why manufacturing will also rise dramatically in 2017.

Vladyslav Rashkovan, Partner of SD Capital

"In making economic predictions, I'd rather consider key factors and trends. Pension reform will allow to reduce budget expenditures. The anti-corruption court will complement the system of the state authorities, which are in charge of combating corruption in Ukraine. Privatisation is also a must as there are still many unprofitable state enterprises."

As a result, we arrived at the conclusion that Ukraine has a chance to become a better place for doing business and its economic image depends on key factors and barriers which are quite feasible to properly overcome.

On behalf of the EBA we are grateful to our guest speakers for their frank predictions and enabling such a constructive dialogue.



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