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Wednesday, August 15

Economy Grew 3.6% in Q2…Foreign Trade up 12%....Seven Kyiv Hotels For Sale…3 million Biometric Passports Issued
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Ukraine’s economy grew by 3.6% in the second quarter, beating forecasts as the recovery gathers steam, the State Statistics Service reports. “The economy of Ukraine has been growing for 10 consecutive quarters,” the Statistics Service says in a release. “Growth of commodity exports has become one of the factors of growth. For the first half of the year, the growth of this indicator was 12.7% compared to the same indicator of the last year.” Fueling growth, workers outside Ukraine sent $4.5 billion home, outflows of workers spurred salary hikes at home, and the government ramped up spending in advance of the March presidential elections.

Ukraine’s foreign trade increased by 12% during the first half of the year, hitting $56 billion, the State Statistics Service reports. Exports of goods and services hit $27.8 billion, an 11.1% increase compared to the first half of last year. Imports rose by 13.5%, to $ 28.5 billion. The trade deficit was $650 million, compared to a $2.6 billion deficit for all of last year. Exports of services, an IT indicator, grew by 5.7% to $5.4 billion, almost twice the level of imports. Exports to the EU, Ukraine’s largest trading partner, grew by 19%, compared to a 13% growth in imports. If trends hold up, Ukraine will end this year with a near balance of trade with the EU.

With Ukrainian wheat making new inroads in Asian markets, another Australian farmer delegation toured Ukraine and Russia this month, GrainCentral news site reports. Jaddod Tonkin, Flexigrain General Manager and head of the 24-member group from Victoria, said on his return to Melbourne: “The purpose of the tour was to make Australian growers aware of the low cost of production within the Black Sea region and provide a first hand experience of the improving quality from this region.”

    Views on IMF’s decision to send a mission to Kyiv for two weeks in September:

    Acting Finance Minister Oksana Markarova: “A new full mission of the Fund after a long pause is, without a doubt, evidence of a good dialogue on many issues, including sustainable budgeting policy, ensuring the deficit is within the approved budget target, fighting corruption, and many others.” 

    Dragon Capital: “The announcement of an IMF mission visit is clearly positive and suggests the sides have made substantial progress on the IMF’s remaining conditions for the next loan tranche of $1.9 billion, namely gas tariff hike and corrective measures for the 2018 budget….At the same time, given the IMF’s previous experience with Ukraine, we think the Fund will not rely on promises and its mission will likely come only after the government approves resolutions on a gas tariff hike and measures to keep the 2018 budget deficit within the target of 2.5% of GDP.”

    Concorde Capital’s Alexander Paraschiy: “The visit’s scheduling is indeed a good signal for expectations about Ukraine’s short-term debt sustainability and the stability of the Ukrainian currency…The timing of such an announcement (during the traditional recess of the IMF board) is a bit unusual and might be related to the IMF’s wish to help the stability of the Ukrainian currency against the background of weakening neighboring countries’ currencies — the Turkish lira has lost 28% vs. the U.S. dollar since the beginning of August, while the Russian ruble has lost 7%.”

    To strengthen the hryvnia, the National Bank of Ukraine sold $66.6 million to banks at a currency auction Tuesday. The weighted average rate was UAH 27.46 to the dollar.

    Economic sentiment inched up in Ukraine, hitting 109.6% in the third quarter, according to calculations by the State Statistics Service. The biggest improvement was registered in business views of retail trade, which hit 10.7%, doubling from 5.3% in the second quarter.

    Bolstering retail sales, money transfers into Ukraine during the first half of the year were nine times greater than transfers out of the country, reports the National Bank of Ukraine. Through June, $1.2 billion came in through 35 money transfer systems, compared to $140 that was sent out. The top sources of money sent into Ukraine were: USA – 15%; Israel – 13%; Russia – 10%; Italy – 8%; and Poland – 7%. From the two neighboring countries, Poland and Russia, migrant workers hand carry home at least twice the official transfer amounts. The top destinations for outgoing money transfers were: Russia – 38%; Georgia – 9%; China – 6%; Azerbaijan – 5%; and Uzbekistan – 4%.  

    Does Kyiv seem a little empty this week? As of July, more than 3 million biometric passports for traveling abroad have been issued to Ukrainians, reports the State Migration Service. In July alone, 440,000 new passports were issued. Ukrainians, who have biometric passports, can enter the EU member states without visas for business, tourism or visiting family for no more than 90 days during any 180-day period.

    Entering the EU is not automatic: almost 25,000 Ukrainians were turned away at Polish border checkpoints during the first half of this year, Ukrinform reports. The number, 24,649 was 76.5% higher than during the same time last year, the Polish Border Guard reports. About 40% of refusals were due to the absence of proper documents for Ukrainians that would justify the purpose of entry and conditions of stay in Poland. Apart from biometric passports, Ukrainian citizens must also have documents confirming health insurance, purpose of the trip, a Polish place of residence, availability of sufficient financial means for the stay, and the intention to return home.

    In a sign that hotel owners see a tourism turnaround for Kyiv, “up to seven hotels in central Kyiv are for sale by their current owners,” says Terry Pickard, chairman of the Pickard realty group. Next month, Europe’s largest discount airline, Ryanair, starts flying from Berlin to Kyiv, followed in October by Ryanair flights from London to Kyiv. Radisson and Best Western hotel groups are looking for properties in Kyiv. Mohammed Zahoor, owner of the Marriott Renaissance brand hotel on Volodymyrska, is looking for an investment partner for his long-stalled renovation project. At Taras Shevchenko 4, work has accelerated on renovating the St. Petersburg Hotel. This should reopen next year, returning 50 three star rooms to central Kyiv.

    In a blow to the capital’s hotel scene, Hassan Ragab, much beloved General Manager of Hilton Kyiv for the last five years, passed away Tuesday morning, apparently of a heart attack.

    For comments and story tips, Brooke is reachable at: jbrooke@ubn.news