On July 16, 2015, Governor of the National Bank of Ukraine met with more than 400 representatives of the international business in Ukraine – companies, being members of the European Business Association (EBA).
Commenting on the macroeconomic situation, Valeria Gontareva pointed out that hryvia deposits continued to show an upward trend, even factoring in the repercussions of the removal of insolvent banks from the market. “Since the beginning of June, domestic currency deposits have increased by 1.9%”, – she stated.
Valeria Gontareva said that FX deposits had started to rebound. In June, FX deposit outflows eased, with FX deposits contracting by less than 1%. We hope that banks will be able to increase their deposit portfolios by the end of this year.
In addition, we expect inflation to follow a decelerating trend over the coming months. With a view to consolidating the positive developments in the money market, we left the discount rate unchanged. At the same time, should the disinflation trend persist, we will be able to reduce the discount rate.”
When explaining to the business community the decisions made by the regulator, she pointed out that the National Bank of Ukraine had to resort to a series of contingency measures in an effort to stabilize the situation in the FX market and prevent the capital flight abroad.
The Governor of the National Bank of Ukraine is convinced that it is premature to raise an issue related to the liberalization of the FX market and start relaxing strict foreign exchange controls. Further, the legislative framework on foreign exchange regulation needs to be revised and upgraded to be aligned with the EU norms and standards. The removal of anti-crisis restrictions is out of the question without drastic changes in the country’s economic system. Comprehensive changes in the foreign exchange regulation should be consistent with Ukraine’s economic and financial policy.
“One should not forget that Ukraine is committed to the IMF Program. All the foreign exchange restrictions put in place by the National Bank of Ukraine in response to the deterioration in the balance of payments are set out in this Program. The removal of foreign exchange restrictions needs to be discussed with the IMF, and this move should meet the IMF deadlines and be in line with the requirements set out in the Program,” said Valeria Gontareva.
At the same time, the Governor of the National Bank of Ukraine underlined that the regulator is moving to the next stage of reforming the financial sector of the country - the stage of quality changes: “Its targets are as follows: focus of the monetary policy on inflation stabilization and putting firmly inflation on a downward. In the future, we expect headline inflation to decline to 13% by as early as 2016. We seek to achieve an inflation target of 5% (+/- 1%). As regards the accumulation of the international reserves – we plan to build the international reserves up to USD 38.5 billion over the next four years. We focus our efforts on further strengthening the banking system and gradually lifting administrative restrictions in the monetary market.
As regards administrative restrictions, Valeria Gontareva added: “We have already started to ease them gradually and, given the further stabilization of situation, we will continue to move in this direction”.
According to our expectations, the gradual economic recovery will start in the third quarter of 2015, driven primarily by net exports and capacity utilization. Overall, we expect GDP to contract by 9.5% in 2015, primarily due to low domestic consumer demand,- said Governor of the National Bank of Ukraine Valeria Gontareva at the meeting with the members of the European Business Association (EBA). – According to our projections, real GDP is expected to rebound to an annual 3% in 2016”.