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Concorde Capital Research: Ukraine MinFin sees GDP growth at 3.6% in 2019, 6.3% in 2021

April 19, 2018 | Cbonds

Ukraine’s Finance Ministry expects the country’s real GDP will grow 3.6% in 2019, 4.0% in 2020 and 6.3% in 2021, according to the Cabinet's draft resolution stipulating budget policy for the next three years, published by the epravda.com.ua news site on Apr. 18. Based on the draft, Ukraine’s nominal GDP will be USD 122.4 bln in 2019 and will surge to USD 144.9 bln in 2021, assuming an average exchange rate of UAH 30.5/USD in 2019 and UAH 31.8/USD in 2021. The document also assumes CPI of 6.5% YTD in 2019 and 4.8% in 2021.

The IMF’s recently published World Economic Outlook provides more conservative numbers for Ukraine: real GDP growth is projected at 3.3% in 2019 with a steady acceleration to 3.7% in 2021 and 4.0% in 2023. At the same time, the IMF sees a stronger Ukrainian currency, forecasting a UAH 29.3/USD rate in 2019 and UAH 30.6/USD rate in 2021.

Alexander Paraschiy: Those who believe in the macro estimates of Ukraine’s MinFin should consider buying Ukraine’s GDP warrants (UKRAIN’40), which will pay about USD 0.2 bln (6% of par) in 2022 and USD 1.4 bln (44% of par) in 2023, and possibly more in the following years.

However, we believe the IMF’s more conservative outlook for Ukraine’s economic growth is more reliable. If the IMF’s forecasts are fulfilled, Ukraine’s payments under warrants will be much smaller than under the MinFin’s forecasts: about 1.4% of par in 2021, 3% in 2022, 4% in 2023, 7% in 2024 and 8% in 2025. Such a payment schedule implies a much smaller value of the warrants. At the same time, we remain bullish about the warrants, as the likelihood is high that Ukraine will show more than 6% in annual real GDP growth in some of the next 20 years.

Issue: Ukraine, FRN 31may2040, USD

StatusCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
outstandingUkraine05/31/20403,214,120,000 USDB-/-/-

Company: Ukraine

Full company nameUkraine
Country of riskUkraine

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