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Export-led real GDP growth was estimated at around 5% yoy in 1Q 2010.
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Public finances remain strained with expenditure growth notably outpacing the increase in revenues.
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On April 27th 2010, the parliament approved the 2010 state budget law with a targeted deficit of 5.3% of GDP. But thereis a risk the broad fiscal deficit may be much higher.
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Amid improving export opportunities and restoration of foreign investors' interest to Ukraine, the current account was virtually balanced in 1Q 2010 while the capital account turned into a large surplus in March 2010.
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Thanks to a number of favorable factors, we have revised upwards the forecast of main macroeconomic indicators for Ukraine in 2010.
Being a very open economy, Ukraine has benefited from the ongoing recovery of the world economy. Driven by export-oriented industries and their related sectors (cargo transportation and wholesale trade), real GDP was estimated to increase by about 5% yoy in 1Q 2010. On the back of slow domestic demand strengthening and delays in natural gas tariff adjustment, Ukraine's consumer price inflation decelerated to 11% yoy in March. The improving economic and political situation in Ukraine and resuming risk appetite of foreign investors allowed Ukrainian banks and companies to re-open foreign capital markets. This, in turn, contributed to the easing of Ukraine's external financing needs and may stimulate a faster recovery.
Real sector data for the first three months of 2010 shows that the economic recovery in Ukraine has been gaining strength. Moreover, stronger-than-expected growth in the global economy, driven primarily by emerging Asia and Latin America, larger social transfers to the population approved in the 2010 budget law and a lower price for imported natural gas (renegotiated with Russia in mid-April) led us to upgrade the 2010 macroeconomic forecast for Ukraine.
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