Economist Viktor Skarshevsky forecasts the forex rate of Ukraine’s national currency, the hryvnia, against the U.S. dollar at UAH 30 by late December 2018.
“In November-December of 2016 and 2017 the hryvnia devalued by 5%. Let’s extrapolate from this trend, and we will get the forex rate at around UAH 29.5-30 by the end of December,” Skarshevsky said on November 19.
The expert points out several possible causes behind such exchange rate fluctuations.
First, the external economic situation (with regard to metal, grain, and chemicals) has now begun to deteriorate, while Ukraine’s trade balance deficit has rapidly widening (by 30% since 2017 and 3.5-fold since 2015).
Second, the dollar is strengthening on global markets.
Third, non-residents are expected to withdraw $1.7 billion in dividends in 2018 against the projected $3.5 billion in 2019. Unfortunately, this is logical and predictable, given the current investment climate in Ukraine. It is not surprising that the inflow of foreign direct investment in Ukraine this year has decreased by 33.4%.
Fourth, it is the government’s seasonal mismanagement. In December budget expenditures will be 2-3 times higher than the average monthly expenses for the year. After all, state budget spending is currently underfinanced by UAH 65 billion ($2.3 billion). Moreover, local budget expenditures are not sufficiently financed as well.
Fifth, the government is interested in a weaker hryvnia, because 40% of the state budget revenue depends on the exchange rate. As soon the devaluation rate increased in the second half of July, the plan on customs payments began to be implemented. Thus, the devaluation helps fill the budget, rather than fighting smuggling, the expert said.
The government drew up the 2018 budget based on the rate set at UAH 30.10 to the U.S. dollar as of the end of the year, the expert said. (UNIAN/Business World Magazine)
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