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29.04.2010
Credit-Rating: Fragile Balance – Ukraine’s Economy in March
Credit-Rating has today published a monthly review of Ukraine’s economic development. The review contains evaluation of economy’s real and financial sectors, balance of payments, currency and stock markets, budget sector and state debt policy, and inflation.
Credit-Rating notes growth in business activities in industrial sector owing to metallurgical, machine-building and chemical companies (the industrial production index was recorded at 116% in March). According to the agency’s estimates the growth of agricultural sector was moderate. The business activities of construction and retailing companies are not going to exceed the figures recorded in the past year and will be constrained by weak growth of effective demand and absence of substantial investments or lending.
The revival in activities of export-oriented companies, as well as soaring investment activities of non-residents following the stabilizing political situation allowed for positive payment balance of USD1bn. The inflow of financial resources prompted increase in bid of foreign currencies in the currency market, which enabled the National Bank to augment its gold and currency reserves with the national currency remaining stable.
In the banking sector the agency notes growing liquidity underpinned by increased resources under low lending activities. The banking sector is rather cautious with resumption in lending, taking into consideration poor credit quality of the majority of borrowers. Credit-Rating also notes that the resource base of the banking sector is primarily formed with short-term funds, which does not allow for resumption of lending in full. The trend of substitution of long-term resources with the short-term ones continued in March – this may negatively affect stability of the banking sector in case the regulator does not sharpen the standard of reserving banks’ short-term borrowings from external markets.
Credit-Rating also notes that the 1Q2010 was rather difficult for revenues to be drawn to the State budget, with low balances on the treasury account were prompting delays in funding payment orders of financial bodies. The hardships with fulfillment of revenues prompted increase in deficiency to UAH5.5bn (with surplus of UAH0.5bn in the similar year-earlier period), which was funded via issuing of domestic bonds. The investors’ interests for purchasing domestic bonds as the least risky investments allowed for decreasing median interest rate to 13.5% in the primary auctions.
Credit-Rating agency has operated in the Ukrainian market since 2001 being committed to assignment of the national scale ratings. The agency has assigned 1081 ratings. As at Apr. 1, 2010 the agency’s list of ratings included 646 ratings: 502 in corporate, 98 in financial and 46 in municipal sectors. In March 2010 the agency assigned 4 ratings, revised 210 ratings, suspended 32 ratings and withdrew 18 ratings.
Information on all credit ratings assigned in accordance with the National Rating Scale may be found in Credit REUTERS and BLOOMBERG information systems.
For more information, please contact:
Information and
analytic department
Sergey Rozumyak +38044490 25 50
SRozumyak@credit-rating.com.ua
Denis
Rudenko
DRudenko@credit-rating.ua
