Crisis in Ukraine: Daily Briefing – 11 May 2016, 7 PM Kyiv time

Talks in Berlin between the Foreign Ministers of Ukraine, Germany, France and Russia produced progress on security issues, the Associated Press reported. German Foreign Minister F. Steinmeier stated, “In the area of security, we made significant progress. […] There were proposals from both sides with concrete coordinates and deadlines,” the Associated Press reported. Ukraine’s Foreign Minister P. Klimkin stated that security was the main priority and added that it was tied to the issue of local elections. Klimkin stated, “We can’t talk about elections […] without delivering security right now,” the Associated Press reported.

Ukraine’s President P. Poroshenko postponed his working visit to the United Kingdom, scheduled for 11-12 May, “given the situation over the election of new Prosecutor General and non-adoption of laws necessary for continuation of cooperation with the International Monetary Fund,” the President’s press service reported. Poroshenko stated, “These reforms are essential for the country. […] I will continue consultations with people’s deputies.”

The European Bank for Reconstruction and Development (EBRD) published its Regional Economic Prospects (May 2016) report. The report stated, “Ukraine’s economy contracted by 9.9 per cent in 2015 after a 6.6 per cent contraction in 2014. […] In the second half of 2015, the economy likely bottomed out, posting positive quarter on quarter growth rates. […] The current account deficit decreased significantly from close to 9 per cent of GDP in 2013 to almost zero in 2015. The volume of net private inflows depends on the resumption of disbursements under the IMF programme, on political stability and on a continued momentum for reform in crucial areas such as banking and energy, privatisation, the rule of law and the administration of justice. The transformation of the banking sector continued, although the flow of credit to the real sector remains highly constrained. The number of licensed banks decreased from 180 in January 2014 to 116 in February 2016. Ownership transparency has improved, controls over related party lending have been tightened and the independence of the National Bank of Ukraine has been strengthened. Official funding remains essential for a further build-up of international reserves which in March 2016 stood at US$ 12.7 billion (approximately 3 months of imports). Fiscal consolidation was significant, with the combined general government and Naftogaz deficit decreasing from close to 10 per cent of GDP in 2014 to close to 3 per cent in 2015. Influenced by the hryvnia depreciation, the public debt-to-GDP ratio increased from 40 per cent in 2013 to close to 80 per cent in 2015, although the Eurobond debt restructuring implemented in 2015 helps to mitigate repayment risks. We are retaining our 2016 growth forecast for Ukraine at 2 per cent and project growth of 2 per cent in 2017.” Earlier this week, the IMF forecast GDP growth of 1.5% in 2016 and 2.5% in 2017 in Ukraine.