Attached File
Total Page:16
File Type:pdf, Size:1020Kb
INSTITUTE FOR ECONOMIC RESEARCH AND POLICY CONSULTING MONTHLY MONITOR Monthly Economic Monitor Ukraine • Svyatoslav Piskun, the former Deputy Head of the State Tax No.8 (22) Administration was appointed as the new chief public August prosecutor. 2002 • The Ministry of Economy and European Integration revised the GDP forecast for 2002. If previously the Ministry anticipated a 6.0% growth, two scenarios are now proposed. • The President of Ukraine signed the law “On Grain and the Grain Market in Ukraine” envisaging state regulation of this market. • Ukraine introduced several new anti-dumping rules and special measures against imports from Russia. Population: 48.4 m • During the first half of 2002 tax arrears (VAT and enterprise Industry/GDP: 30.9% profit tax non-payments mainly) increased by more than 50%. Agriculture/GDP: 14.7% • The NBU increased the period for commercial bank refinancing Investment/GDP: 20.4% and lowered the discount and reserve requirement rates. Exports destination: Russia 22%, EU 17% Imports origin: Russia 34%, EU 20% Politics: Svyatoslav Piskun was appointed to be the new chief public prosecutor A new chief public prosecutor was appointed. Parliament approved the nomination of Svyatoslav Piskun, the former Deputy Head of the State Tax Administration and Head of the Investigations Department of the Tax Police. Parliament approved the major policy directions for the 2003 budget (Budget Resolution) on the condition that the suggestions by the deputies will be taken into account when the budget is prepared. One of the most important suggestions was a reorientation of Real Growth of GDP and revenues of the budget organisations from special to general funds. Industrial Output This measure should increase the transparency and accountability of 21 % yoy, cum. the state's financial situation. In addition, the Verkhovna Rada declared the implementation of the 2001 Budget unsatisfactory. 18 Ukraine and France signed a bilateral agreement on restructuring 15 Ukraine’s state debt to France (EUR 18.96 m). This was the fourth 12 agreement Ukraine signed within Paris Club, following the debt 9 restructuring with Germany, the United States, and Italy. A similar agreement has still to be signed with Japan. 6 Parliament ratified an agreement with the IMF that foresees an 3 increase in Ukraine’s access to IMF loans. Ukraine’s quota will grow 0 by 29%. According to current arrangements under the Extended Fund Facility Program, Ukraine’s non-drawn balance, which expires Jul-01 Jan-01 Jan-02 Mar-01 Mar-02 Sep-01 Nov-01 May-01 on September 3, 2002, constitutes USD 978 m. A successful May-02 conclusion of the Program is doubtful due to unresolved fiscal real GDP growth questions including the VAT refund. Future co-operation with the IMF may include a stand-by program or non-lending collaboration. real growth of industrial output Real economy: The Ministry of Economy revised its S ource: Derzhkomstat macroeconomic forecast The Ministry of Economy and European Integration revised the GDP forecast for 2002. If previously the Ministry anticipated a 6.0% growth, two scenarios are now being proposed. According to the target scenario, the real GDP will reach 6.0% in 2002, while the conservative scenario envisages only a 4.8% increase. The present growth dynamics are quite uneven. Although the real GDP grew by 4.3% yoy from January to June, the value-added declined for several types of economic activity including construction, the Institute for Economic Research extractive industry, as well as generation and distribution of and Policy Consulting electricity, gas and water. The GDP growth was based on three Reytarska St. 8/5-A, 01034 Kyiv sectors: manufacturing, the wholesale and retail trade, and Tel. (+38044) 228-6342 agriculture. Fax (+38044) 228-6336 For January to June the industrial output increased by 5.8% yoy, E-mail: [email protected] compared to 3.1% yoy for the first five months. This rise could be http://www.ier.kiev.ua 1 INSTITUTE FOR ECONOMIC RESEARCH AND POLICY CONSULTING MONTHLY MONITOR attributed to reduce of uncertainty caused by the recent elections together with growing household and external demand. There is no single industry that can be seen as the growth engine. Growth of Value Added in Selected Sectors An analysis of the expenditure side of the GDP showed that final % yoy, cum. consumption during the first quarter of 2002 continued to dominate 30 in Ukraine. While it grew by 6.4% yoy, fixed capital accumulation 25 showed a 1.4% increase only. 20 Sectoral trends: A new system of grain pledge 15 purchases was introduced 10 Agriculture. The President of Ukraine signed the law “On Grain and 5 the Grain Market in Ukraine” that envisages a state regulation of this 0 market by purchasing grain at a pledge price. The aim of the law is -5 to smooth price volatility on the market. This kind of regulation has -10 proven to be expensive and inefficient in other countries, and it is doubtful whether Ukraine has the financial and administrative Jul-01 Jan-01 Jan-02 capacities to implement such a regulation at this time. In addition, Mar-01 Mar-02 Sep-01 Nov-01 May-01 May-02 the law is not written with enough clarity concerning its manufacturing industry implementation, and where the revenues required offsetting its retail and wholesale trade costs will come from. As a result, it is doubtful that grain producers will trust this new state regulation system. construction agric ulture & forestry The VAT refund problem again emerged rather sharply in connection S ource: Derzhkomstat with grain exporters who did not receive their VAT reimbursements from the state. The grain exporters threatened to lower the purchase price for grain by 20% if this issue is not resolved. On July 29 the State Tax Administration approved a VAT debt repayment schedule to exporters. The timing will depend on the amount owed and on the company-exporter, varying from three months to one Privatisation Revenues in 2002* year on average. UAH m 1000 Privatisation. The targeted level of privatisation receipts for the first half of the year was not met. According to the Ministry of 800 Finance, the total receipts from privatisation, directed to general 600 state revenues, did not reach even half of the UAH 836 m targeted 400 for this period. Vice Prime Minister Vasyl Rogoviy stated that privatisation of Ukrtelekom by the end of this year is completely 200 unrealistic. Thus, realising the UAH 5.8 bn annual privatisation plan 0 is very uncertain. Jan Feb Mar Apr May Jun Infrastructure. Tariffs for intercity telephone calls will increase by nearly 50% in an attempt to adjust prices to costs in the collected planned telecommunications sector. The tariffs for international calls will be Source: State Treasury reduced by 20% on average since the underlying costs decreased. * only general fund of the budget Although the government tries to bring the telecommunications sector into accord with market standards, it decided to maintain privileged tariffs for rural areas, which leads to cross-subsidisation and inefficiency. The number of privileged telecommunication subscribers, who pay 50% of the standard tariffs, remains constant at 1.6 million. Merchandise Trade Dynamics External Sector: Trade relations with Russia remained Exports quite strained 1600 USD m According to the Derzhkomstat, exports grew by 2.8% yoy and imports by 2.4% yoy during the first five months of the year. This 1200 positive dynamic resulted in a merchandise trade surplus of USD Imports 473.6 m. The growth of exports of food and agricultural products, mineral products and textiles overweighed the reduction in 800 chemicals and metal exports. Ukraine actively penetrates world markets, especially the Asian and 400 Balanc e African ones. However, trade relations with Russia, its major trade partner, remained quite strained. During January to May exports to 0 Russia dropped by 30%, while imports fell by 3%. In July Ukraine introduced several new anti-dumping and special measures against imports from its neighbour. In particular, a quota on baking soda -400 Jul-01 Jan-01 Jan-02 Mar-01 Mar-02 Sep-01 Nov-01 was established, a tariff on railway switches, as well as a temporary May-01 May-02 tariff on selected types of passenger cars. In its turn, Russia S ource: Derzhkomstat introduced an anti-dumping tariff against Ukrainian concrete 2 INSTITUTE FOR ECONOMIC RESEARCH AND POLICY CONSULTING MONTHLY MONITOR reinforcement bars and a temporary tariff on zinc-coated rolled stock. Negotiations on a new free trade agreement came to a deadlock. Primary State Debt Market Fiscal policy: Tax arrears increased by a half in the first UAH m % six months 700 16 After the first half of 2002 the consolidated fiscal surplus was 1.5% 600 14 of GDP. However, both revenues and expenditures remained behind 500 12 10 budget, emphasising the continuing fiscal problems in the country. 400 8 As of July 1, the tax arrears, mainly VAT and enterprise profit tax 300 6 non-payments, amounted to UAH 9.9 bn, having increased by more 200 4 than half since the start of the year. The energy sector has 100 2 accumulated the largest amount of arrears. The increase in VAT 0 0 arrears by this sector casts doubts on the effectiveness of the Jan Feb Mar Apr May June July measures the government undertook to improve the VAT administration system. Amount of government bonds sold In July the Ministry of Finance received around UAH 597 m from Yield to maturity (monthly average) government bond sales, mostly short-term ones. That constitutes Source: NBU 44% of the total amount of government bonds sold since the start of the year.