Protests not Effecting Economy.

Following over two months of demonstrations throughout Ukraine, the Central Bank of Ukraine has said the protest have yet to make an economic impact on the country. A bailout package from Russia, signed in December has protected Ukraine’s economy from the unrest in the capital, but monetary policy needs to be softened to try and kickstart growth after five quarters of recession.

The violence sparked by President Viktor Yanukovych’s rejection of an EU trade deal and resulting political twists and turns in the government, have yet to be felt by the economy. Of the $15 bn loaned by Russia, $3 bn has already been delivered with another $2 bn soon to follow. Although Russia, has raised the idea of stalling the loan until a new government is instituted. 

The central bank is preparing to do more to help aid the economic recovery before presidential elections next February. The main goal for this year is is creating conditions for boosting bank lending to the economy and for the implementation of investment projects that should bring results, Also a decrease in the main interest rate is one of the measures being considered. 

The government has targeted 3 percent growth in 2014, but the State Statistics Service has not yet published gross domestic product data from last year.Analysts at 16 Ukrainian banks and brokerages, polled in December, expected GDP to shrink by 0.5 percent in 2013 after it grew 0.2 percent in 2012. Last year, the central bank provided banks with refinancing of 71.5 billion hryvnas ($9 billion). Bank lending grew by 96.6 billion hryvnas, or 12 percent, last year.

In 2008 to 2009 the regulator ordered banks to transfer 100 percent of their mandatory reserves into a central bank account in order to withdraw billions of hryvna from the local market and restrain pressure on the exchange rate. In 2011 to 2013 the central bank decreased the requirement to 40 percent. At the end of 2013 about 11 billion hryvnas remained frozen in the central bank account. The central bank will also be considering stimulus measures to further help regional banks. 

Ukraine posted its 2013 rate of inflation at 0.5% after a deflation of 0.2% in 2012, the government target is to keep inflation at 4.3% this year. Also being expected is a decline in bank rates for corporate lending to 12% to 13% percent from the current level of 16.6%.


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