Economic risks are increasing sharply
Overview:
Political infighting between President Yuschenko and Prime Minister Timoshenko has been well documented. The two allies from the Orange Revolution have once again found it difficult to work together in government. Personal rivalries, upcoming Presidential elections in 2009 and constitutional confusion over the relative power of the president and prime minister have all been at play here. However, this political noise has had a limited impact on economic developments in recent years because economic policies were essentially sound and the macroeconomic backdrop relatively favourable. The period ahead will prove more challenging and the lack of an appropriate policy response will become more problematic. With foreign exchange reserves high debt service is not in question but investors will increasingly become concerned with the political and economic outlook for Ukraine.
External debt recommendation:
We are underweight on Ukraine. With foreign exchange reserves high debt service is not in question but investors will increasingly become concerned with the political and economic outlook.