THE ZELENSKYY EFFECT

BLOOMBERG: As Europe Struggles, Ukraine’s Economy Heads for an Upswing

President Zelenskyy's ambitious plans highlight where the previous Ukrainian government fell short: judicial reform, privatization and loosening rules on owning farmland

Daryna Krasnolutska and Kateryna Choursina
Thursday, 15 August 2019 15:44

As economic growth falls across Europe, Ukraine may be embarking on an upswing.

Data this week showed expansion in the former Soviet republic surged last quarter, even as U.S.-China trade tensions and a wider global slowdown weighed on most of the continent.

The pace -- 4.6% -- was unexpectedly quick. The World Bank had warned that if growth didn’t top the rate of recent years it would take half a century to bring income up to the levels of neighboring Poland, which has thrived since joining the European Union.

President Volodymyr Zelenskiy, who won control of parliament last month, has set his sights on expansion of 5% or more in the coming years. A reform plan is fueling optimism among investors and has made the hryvnia this year’s best-performing currency.

“The initial signs are encouraging,” said Viktor Szabo, investment director at Aberdeen Asset Management PLC in London, who helps oversee $14 billion in emerging-market debt.

Aberdeen has an overweight position in Ukrainian bonds and Szabo rues the company’s early disposal of warrants linked to economic growth issued after a 2015 government debt restructuring.

He expects a “bold” program with the International Monetary Fund to be agreed on once a new government is in place next month, though says an overhaul of the country’s murky court system is vital to the new president’s success.

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