By Volodymyr Verbyany

(Bloomberg) -- Ukraine’s govt. sees no reason to increase
utility tariffs for households this heating season, Prime
Minister Volodymyr Hroisman says during video conference on
preparation to cold season.

* Heating season in Ukraine starts mid-October, ends in April
* NOTE: Ukraine Storing More Than 14 Bcm of Natgas: Bilyavskiy

To contact the reporter on this story:
Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net

Prime Minister Volodymyr Groysman promises to spend more money on repairing roads, in roasdside press conference on Wednesday in Kherson region. (UNIAN/ Vyacheslav Gusakov)

Tmothy Ash

Not sure how this works.

The government agreed in the third review under the IMF EFF to announce utility price hikes from July 1. So hard to see the IMF now being able to agree the sign off on the 4th review any time soon given that this is a clear example of backtracking.

Seems to be a very political move by Groysman, and Poroshenko.

Few people expected the fourth review to be signed off any time soon anyway.The Ukrainian side is relatively flush with cash at the moment, and likely could access markets cheaply.

So maybe this does not change much in short term - but it is bad for the longer term structural reform agenda. There are still a lot of difficult structural aspects of the IMF EFF on which the government is foot dragging - particularly the anti-corruption agenda. (There seems to be more effort by the Poroshenko regime to put pressure on anti-corruption fighters than the main culprits of corruption).

Lots of focus this week on the 2.4% real GDP growth print, and how good/bad that was. It is positive that Ukraine is growing still after major headwinds, but from low base. Arguably growth should be much stronger.

Why isn't it?

The business environment is still poor, and this is detracting from foreign and domestic investment.

Interesting to look back at some post conflict economies in Emerging Europe, and see that the likes of Serbia, Croatia and Macedonia all grew 5-6% pa in the 4-5 years after war/conflict, from a low base.

So Ukraine should be doing better, from such a low base. Remember it lost 20% of GDP, and half of USD nominal GDP at exchange rate from 2013-2015.

One might expect a stronger bounce.

The reasons are - weak domestic political mix, slow progress in improving business environment, and still conflict in the West, with pressures from Russia only partially compensated by support from the West.

Timothy Ash is a senior sovereign analyst at BlueBay Asset Management in London