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Experts differ in their assessments of the real impact of the blockade of NKT on the economy of Ukraine

The influence of the blockade of transport communication with territories outside the control (CNT) on the economy of Ukraine will definitely be a negative, but the degree of influence depends on fulfillment of a number of related factors, according to respondents, the Agency “Interfax-Ukraine” experts.

“The economy (after the decision on the time termination of movement of goods across the line of contact in the Donetsk and Lugansk regions – if) is likely to face the risk of recession. In the second quarter of 2017 may be a reduction in real GDP compared with the first quarter in seasonally-adjusted terms. Further, if until the third quarter of 2017, the unlock does not happen, then the reduction in real GDP will continue in July-September. If the decline in GDP two quarters in a row – this means that the economy will go into recession” – believes head of the analytical Department of the group of ICU Alexander Valchyshen .

According to experts, if the authorities employ measures to stimulate the economy, it is likely that the dynamics of GDP by the end of this year will slow to 0% from 2.2% last year.

A. Valchyshen also noted the high likelihood of increased pressure on the hryvnia.

“The authorities, including the national Bank, it is necessary to choose – or to keep a stable exchange rate by increasing interest rates, or to support the economy. At the same time to have both won’t work,” he said.

The opposite opinion is shared by head of analytical Department of investment company “the Concorde the Capital” Alexander steam.

“If to proceed from the official statistics and the assumption of “ceteris paribus”, you’ll get just those figures, which they say official sources: the effect on balance of payment minus a $1.6-2 billion, the negative effect on GDP of up to two percent, the negative effect on the dollar – hryvnia. But this theory, which has very little to do with reality,” – said the expert.

According to his estimates, the negative effect on metallurgy is not required, production of steel products may decrease by $1.3-1.4 bn, given simple businesses on the tubing string.

“Last year, the steel plant occupied territories produced about 3.4 million tons of steel. Stop these plants means only the release of niches for other manufacturers – the plants located on the territories controlled by reduced steel production by 4.7 million tons in 2016 compared with 2013. This means that they have a great potential for growth. If our metallurgists are focused on making profits – they this opportunity should take advantage of. Obviously, the reorientation will take some time, perhaps they will earn $70 per ton, as last year, but somewhere in the $30-40 per ton. But they nevertheless can earn,” – said A. para.

In his opinion, the negative effect on the hryvnia is also not required.

“There is the risk of loss of up to two billion dollars trade balance (yoy) – but it is only 4% of our annual exports. Taking into account the current high prices for steel and ore, as well as the possibility of reorientation of Ukrainian metallurgists, we can talk about a much smaller actual effect of the blockade on the trade balance. If there is some negative effect on the hryvnia exchange rate, it is likely that it will be limited to official, interbank, market. Such pressure can affect the rate in the range of 50 cents on the dollar. On the black cash market and the negative effect may not be. Forty days of actual blockade had no effect on the stability of the hryvnia” – said the expert.

The chief of analytical Department of investment company “Art Capital” Igor Putilin noted that the impact of the blockade ORDO on the economy of Ukraine at present does not give even a rough estimate.

“According to our calculations, the total revenue only Alchevsk and Yenakiyevo steelworks, located on the tubing string and is one of the main sources of export revenue in 2017 could reach $1.2 billion, based on current steel prices. That is, in the worst case scenario, loss of revenue even these two enterprises is a severe blow to the economy, as more than 1% of nominal GDP in 2017. At the same time, we don’t know how much the decline in exports will be offset by lower imports. The resulting balance of payments deficit and the current account will definitely be lower,” he said.

In addition, said I. Putilin loss of control over the enterprise “Krasnodonugol”, may cause a shortage of coke and, consequently, a decrease in the production of iron and steel in other enterprises of the group “Metinvest”, which are on the controlled territory.

“From the operational statistics of steel production for 13 days of March, already visible negative consequences for Ukraine’s average daily steel output fell by 8% month-on-month and 20% year-on-year. Moreover, this decline in steel production was recorded before the official decision of the Council of national security and defense Council (NSDC) and the complete blockade of NKT. After the decision of the NSDC, we should expect a deeper drop in steel production”, – he said.

In General, I. Putilin sure that the blockade will have both a direct and indirect impact on the economy, exchange rate, balance of payments and budget revenues. “If the fall of steel production in 2017 may exceed 15%, this will lead to a decline in real GDP within 1%, against the expected 2-3% growth,” he said.

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