At a Kyiv press conference on Nov. 19, the World Bank said it considers Ukraine’s banking reforms to have been successful but warned that any rollback on this progress could destabilize the nation’s banking sector.
The bank also released slightly improved economic forecasts for Ukraine, predicting higher economic growth and lower inflation than previously estimated.
“We still consider banking and financial reform successful,” said Satu Kahkonen, the Director of the World Bank for Ukraine, Belarus and Moldova, according to the UNIAN news agency. “What the National Bank of Ukraine and the authorities have done over the past five years is really impressive,” she added.
According to Kahkonen, these reforms have stabilized the banking and financial sectors.
“It is very important to maintain this stability and not cancel any reforms. Canceling key reforms can destabilize the banking sector again. And no one needs it now,” she said.
Between 2014 and 2017, 96 banks had their licenses revoked by the National Bank of Ukraine, or the NBU. All of them were declared insolvent, many were pocket banks for oligarchs and businessmen, some of whom were implicated in financial crimes.
In total, half of Ukraine’s banks were closed during this period.
More recently, some observers and experts have warned that state-owned banks, the NBU and banking sector reformers are now under threat by those who lost out from the financial sector clean-up.
Economic picture
The World Bank also reported on Nov. 19 that consumer inflation in Ukraine will slow to 5.5% next year and 5% by 2021.
As of September, inflation was at 7.5% and decreased to 6.5% in October. In 2017, consumer inflation was at 13.7%, according to official statistics.
The bank also improved its forecast for overall economic growth in Ukraine this year to 3.6% from the 3.4% it previously projected.
“For 2019, we do not expect any surprises and we think that GDP this year will grow by 3.6%,” Anastasia Golovach, a World Bank economist in Ukraine said.
“During the first half of the year, the growth of the Ukrainian economy accelerated to 3.6% compared with 3.3% in 2018. If we add to this the indicators of the third quarter, then we have a 3.7-3.8% growth over the 9 months of this year,” said Golovach.
Among the growth factors, the economist pointed to record crop harvests and the recovery of the financial sector. If World Bank forecasts prove accurate, Ukraine’s economy will be growing at 4.2% by 2021.
Ukrainian Prime Minister Oleksiy Honcharuk has recently been criticized for targeting 40% growth over the next five years, or about 8% growth per year.
However, a number of independent analysts are also bullish.
“I firmly believe that Ukraine can be the most exciting reform and investment story in emerging Europe,” Timothy Ash, a London-based market analyst, wrote in a recent op-ed for the Kyiv Post.
