Market Analysis

Ukraine"s economy will be able to return to pre-crisis levels until late 2012, subject to real GDP growth at 2-5% in 2010-2012, is projected in the analytical review of the investment company Renaissance Capital Ukraine.

"low base of comparison in 2009, and the positive dynamics of world markets should determine the resumption of economic growth in Ukraine in 2010. However, the problems of the banking system and the possible political uncertainty after the presidential elections in early 2010 may limit the recovery of investment activity, remain major constraints for further growth, "- noted in the review.

Experts believe that up to 2009 decline in GDP will amount to 12-13%.

According to their forecasts of GDP growth in 2010 will amount to 2,1% in 2011 - 5,2% in 2012 - 5,5%.

"Despite the slowdown in the fall of GDP in the second quarter of 2009, the scale of the restoration of the Ukrainian economy was less significant than we expected", - states the company"s analysts in the survey.

However analysts stressed that the main reason for the positive trend of the GDP has been the restoration of world markets rather than measures taken by the Government, in particular, due to some recovery in the steel sector against the backdrop of improved conditions in world metal markets.

However, experts point out that positive dynamics of world markets for metals and minerals has been less volatile than originally projected, resulting in a very moderate growth in production of metallurgical production and industrial production in Ukraine in general.

As reported, in 2009, the volume of industrial production in Ukraine decreased by 21,9% in comparison with 2008. Projections "Renaissance Capital Ukraine, industrial production in 2010 will grow by 3,6% in 2011 - by 6,8%, in 2012, growth will slow slightly - up 6.6%.

Analysts also noted that the situation in the Ukrainian banking system remains fragile: banks still do not make loans to real sector to the extent appropriate and affordable rates.

However, in their view, the low growth rate of retail sales represent only "as small and irregular, the monthly increase in real wages in the second quarter of 2009.

However, as noted in the review, despite the growth of retail sales in the month compared with the stable in May 2009 (the exception was only in September), the annual decline in retail turnover, compared with the 2008-meters has become a significant - 20,6 %.

"It seems that the population of Ukraine is not yet ready to spend the savings accumulated outside the banking system, because of uncertainty regarding future income, which reflects the uncertainty in connection with the presidential elections", - experts say.

investment company forecast growth in retail sales in 2010 to 1,5% in 2011 - on 3,5% in 2012 - at 6%.

In addition, analysts noted a significant reduction in investment in fixed assets in 2009 - about 50% of the annual comparison.

According to their estimates, against a background of political instability and difficulties in negotiating with the International Monetary Fund, it is unlikely that the situation will improve in the coming months.

Experts forecast growth in investment in fixed assets in 2010 amount to 4,8% in 2011 - on 3,5% in 2012 - 6%.

As experts note, a significant amount of funds accumulated by the people outside the banking sector (about $ 55 billion), can support aggregate demand, subject to the overall stabilization of the economic and political situation that will stimulate growth in the retail trade and paid services.

In addition, analysts have noted several factors that will contribute to the growth of inflation in 2010. In their view, this may contribute to the need to raise gas prices for population and public utilities, the possible volatility of the hryvnia exchange rate in the first half of 2010 due to easing of monetary policy and high inflation expectations of business.

projected &bbaamp;quot;Renaissance Capital Ukraine, an increase in consumer prices in 2010 will amount to 13% in 2011 - 11,3%, in 2012 - 9,2%.

It was reported that in 2009 consumer prices rose by 12,3%, while core inflation has reached 14,9%.

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