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Wednesday, June 17

Economic Recovery to Start This Summer...Corona Concern Returns...Bond Yields Go Back to B.C. – Before Coronavirus...China Pioneers Freight Trains to Ukraine...Boryspil Reopens, City Officials Sit on Sikorsky...
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 will start to recover this summer and will grow in the fall, Economy Minister Ihor Petrashko predicted yesterday at a briefing on the first 100 days of the new cabinet. “We believe the June trend is improving,” he said. “We are seeing the opening of trading establishments, there is a revitalization of processes between the regions. Everything is starting to move more actively.” He cautioned that growth depends on keeping coronavirus at a low level, preventing a return to lockdown measures.

The small business stimulus program, Affordable Loans 5-7-9%, has distributed 639 loans for a total of $15 million since February, the Finance Ministry reports. The average loan size of $23,500 reflects the loan cap of $55,000. Although 16 private and state banks now participate in the program, it is far short of its announced goal of extending 50,000 loans by next February.

Olena Zelenska, wife of the President, is hospitalized with double pneumonia after contracting coronavirus. The hospitalization of Ukraine’s 42-year-old First Lady has refocused national attention on the pandemic. While proven infections are up around 50% in the last week, mortality has remained low. On Monday, 11 people died in Ukraine of coronavirus complications, bringing the three-month total to 912.  Health Minister Maksym Stepanov told reporters yesterday: “We all confused the easing of quarantine with the cancellation of all restrictions.”

    Concorde Capital’s Zenon Zawada writes: “The government is well aware of the political consequences of an extended or reimposed severe quarantine and wants to avoid such measures…the E.U. opening its borders as of July 1, an event being eagerly awaited by hundreds of thousands of Ukrainian citizens, depends on reciprocal measures from the Ukrainian government. The government is interested in allowing these people to depart for Europe.”

    This week, 83% of Ukraine’s restaurants are now operating again, although many only for takeout or summer veranda service. Sales have returned to 70% of pre-lockdown levels, OpenDataBot report, comparing to early March levels. Restaurants “that survive will most likely be able to reach the indicators of early 2019 no earlier than next year,” Rodion Eroshek, CEO at joinposter.com, a point of sale oriented consultancy for cafes and restaurants.

    As of Monday afternoon 40,314 people in Ukraine are using the ‘Diy Vdoma,’ the self isolation app created to monitor people who test positive for coronavirus or who come from countries with high rates, reports the Digital Transformation Ministry.

    One week after the central bank lowered Ukraine’s prime rate from 8% to 6%, the Finance Ministry pushed down yields on short term bonds. At yesterday’s weekly auction, yields on 3-month bonds fell from 9% to 7.5%. Yields on 6-month bonds fell from 9.5% to 8%. For the first time since February, the Ministry auctioned 2- and 3-year bonds. Yesterday, yields fell back toward the pre-crisis levels of 10%. The 2-year bonds carried 10.6% per annum yields, and the 3-year bonds carried 10.8% per annum yields. The auctions netted $74 million.

    A container train left Wuhan, China on Tuesday bound for Kyiv. Ten days from now, another Chinese  freight train – the third this month — leaves Nanchang, China for Kyiv. With the 15-18-day service becoming a regular logistics option, Ukrposhta and rival Nova Poshta are negotiating regular freight deliveries by rail. The trains pass through Russia, crossing into Ukraine at the Zernovo-Sorokyne crossing in Sumy Oblast.

    Sending cargo by rail from China to Ukraine is 2-3 times more expensive than by ship, but takes one third the time, Valery Tkachev, deputy director of Ukrzaliznytsia’s commercial department, tells the Center for Transportation Strategies. Believing there is niche market for speed, Formag Forwarding, the Kyiv company that organizes the container trains, tells the Transportation news site: “Judging by the demand that has arisen now, trains can run not just weekly. There is enough cargo for a daily train.”

    Trains go to China’s border with Mongolia, where the containers are shifted to waiting rolling stock that can travel on Soviet-era broad gauge track. Delivering a 40-foot container from the Chinese border to Kyiv costs $3-3,300. From China, the trains carry high value items – drilling equipment, bicycle parts, furniture, household goods, and personal protective equipment. Now, Formag and Ukrzaliznytsia work to fill containers with goods from Ukraine to China. This year, Ukraine’s exports to China are running at double last year’s levels.

    Economic confrontation between China and the United States offers opportunities for Ukrainian exporters in China and for manufacturers in Ukraine, Olga Drobotiuk, director of the Modern China Institute at Kyiv National Economic University, tells Ukrinform. “Developing countries, in particular Ukraine, will be able to strengthen their position in the Chinese market by offering an alternative to imports from the United States. Such countries may also become members of new production chains from the United States or China.”

    Poland has re-opened four border crossings for cars and trucks. They are: Krakovets-Korczowa; Rava-Ruska-Hrebenne; Yahodyn-Dorohusk; and Shehyni-Medyk.

    Kyiv Boryspil expects to handle 15 international flights today, double yesterday’s number.  Yesterday’s planned resumption of flights at Kyiv Sikorsky was has been delayed due to an unexpected holdup by Kyiv City officials. Today, Wizz Air is to fly out seven flights out of Kyiv. Kharkiv airport has re-opened with a daily Windrose flight from Kyiv. Lviv has no flights scheduled due to the quarantine imposed on the city.

    Ryanair has started selling tickets for flights from Ukraine to a series of Italian cities, starting July 6. In a schedule designed to last through October, Ryanair will  fly from from Kyiv Boryspil to Rome Fiumicino, Milan Bergamo, Bologna and Catania; from Lviv and Odesa to Rome, Milan and Bologna, and from Kharkiv to Milan. For now, Italy is on Ukraine’s ‘red list’ of country, meaning that incoming passengers will have to self-isolate for two weeks in Ukraine.

    Warning that Ukraine’s aviation industry “may be in danger of extinction,” SkyUp, Azur Air Ukraine, the airports of Lviv and Zaporizhia, and UkSATSE, the air traffic control agency, have written President Zelenskiy and Prime Minster Shmygal, asking for emergency aid: ending VAT on domestic flights, return of 2019 dividend payments to the government, a 30% cut on future dividend payments, and long-term interest-free loans from state-owned banks. The letter says: “Only the state has the necessary levers of influence, resources and the ability to influence the situation prevailing today in the aviation industry.”

    From the Editor: Oddly, Ukraine now trades more with faraway China than with its eastern land neighbor, Russia. But it would be naïve for Ukraine to see China as a future geopolitical ally. In Central Asia, the Chinese are careful to not allow the Russians to lose face. Russia maintains memories of lost empire by posting soldiers and shouldering security responsibilities. But in the reality of modern Central Asia, Russians are the mall cops in a big Chinese shopping center. With Best Regards Jim Brooke jbrooke@ubn.news