Ukraine Country Risk Report

Published 23 June 2015 | Quarterly

  • 56 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Ukraine Country Risk Report

Core Views:

  • Ukraine's economy is headed for a major recession which it is unlikely to emerge from until 2017. The potential for a resumption of fighting between the Ukrainian army and pro-Russia forces in the east, and the persistent threat of a military invasion by Russia, raises huge challenges to our ability to forecast the economic outlook over the coming quarters to any meaningful degree of confidence.

  • EU/IMF financing package will require major structural reforms, including: FX liberalisation (although this is likely to be implemented in stages), partial removal of gas subsidies and potentially pension reform.

  • Despite the new IMF package, Ukraine's fiscal position remains poor and is likely to deteriorate over the coming quarters. FX shocks, extended fighting and the growing risk of a banking sector bailout all pose significant challenges to the sovereign debt profile. Ultimately, we believe that Ukraine's debt load is likely to become unsustainable, necessitating a debt restructuring further down the line.

  • Putin will be happy with Crimea for now, and will not push military intervention into North East of Ukraine. Ethnic divisions in NE Ukraine not nearly as clear cut as Crimea, and it would benefit Putin to retain a large ethnic Russian influence in mainland Ukraine (enabling him to maintain a direct political stake in Ukrainian affairs).

Major Forecast Changes:

  • We have adjusted our hryvnia forecasts and expect the unit to average UAH24/USD over 2015 and UAH26/USD in 2016.

  • A sovereign debt restructuring is now our core view, and we expect it could happen as early as H115.

Key Risks To Outlook:

  • A sharper than expected devaluation could trigger major shockwaves through the domestic economy, particularly within the financial sector which has barely recovered from the 2008 devaluation. Existing capital buffers may prove insufficient to deal with a devaluation of 30% magnitude or greater.

  • We see huge challenges surrounding the ability of...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1:
7
Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics I
8
Minsk II Ceasefire: Glimmer Of Hope Likely To Be Extinguished
8
Table: Political Overview
8
Domestic Politics II
9
Emerging Conflict Scenarios: Escalation Risks Still High, Despite 'Ceasefire'
9
Long-Term Political Outlook
13
Eastern Separatism To Persist; Reforms To Face Bumpy Path
13
Chapter 2: Economic Outlook
17
SWOT Analysis
17
BMI Economic Risk Index
17
Economic Activity
18
Economy Close To Collapse
18
Table: GDP By Expenditure
18
Debt Analysis
20
New Bailout Package Will Not Avert Credit Event
20
Table: IMF Programmes
20
Fiscal Policy
21
Assessing Possible Debt Restructuring Options
21
Table: Fiscal Policy
22
Chapter 3: 10-Year Forecast
25
The Ukrainian Economy To 2024
25
Colossal Structural Reform Needed To See Through The Decade
25
Table: Long-Term Macroeconomic Forecasts
25
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
Table: Operational Risk
30
Availability Of Labour
31
table: Emerging Europe - Availability Of Labour Risk
33
Table: Labour Force Employment By Sector
34
Crime Risk
35
Table: Emergi ng Europe - Crime Risk
35
Table: Crime Statistics
37
Chapter 5: Key Sectors
39
Automotives
39
Table: Autos Total Market - Historical Data And Forecasts
39
Food & Drink
42
Table: Food Consumption Indicators - Historical Data & Forecasts
42
Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts
45
Other Key Sectors
47
Table: Oil and Gas Sector Key Indicators
47
Table: Pharm a Sector Key Indic ators
47
Table: Infr astructure Sector Key Indicators
47
Table: Telecoms Sector Key Indicators
48
Table: Defe nce and Security Sector Key Indicators
48
Table: Freight Key Indic ators
48
Chapter 6: BMI Global Macro Outlook
49
Global Outlook
49
Deflationary Pressure
49
Table: Global Assumptions
49
Table: Developed States, Real GDP GrowtH, %
50
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table: Emergi ng Markets , Real GDP Growth , %
51

The Ukraine Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Ukraine. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Ukraine's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Ukraine's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Ukraine's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Ukraine, including currency volatility, the commodity price boom and protectionist policies.

The Ukraine Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Ukraine' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Ukraine through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Ukraine Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Ukraine and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Ukraine, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Ukraine over the next 5-years?

BMI's Ukraine country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Ukraine Market - Political Strengths, Weaknesses, Opportunities and Threats facing Ukraine.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Ukraine's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Ukraine’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Ukraine's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Ukraine?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Ukraine against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Ukraine’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Ukraine will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Ukraine's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express