Macroeconomics
Ukraine is set to enter a painful period of economic “shock therapy”, with austerity measures and an overhaul of its system of state governance. We view a fundamental change in the country’s export-import breakdown as a key part of structural reforms that will erase the country’s traditional wide current account deficit, which has been hurting Ukraine’s economy since 2008. The current account deficit fell from USD 16.5bn for 2013 to USD 5.3bn in 2014. Unfortunately, the deficit’s decline was not attributable to a rise in Ukrainian exports, but rather resulted from a significant drop both in exports and imports last year amid the war with pro-Russian separatists and the devaluation of the hryvnia. Importantly, Ukraine’s natural gas imports were cut by 30% YoY from 28.0bn cubic meters (cu-m) in 2013 to 19.6bn cu-m in 2014. The country plans to import 25bn cu-m of natural gas in full-year 2015, according to a forecast from the Energy Ministry. We believe Ukraine will be able to increase i
