Pandemic coronavirus and quarantine continue to weaken the Ukrainian economy: the unemployed becomes greater, and the average earnings of Ukrainians reduced
The website “Today” traditionally publishes the consensus forecast of the main economic indicators in the country, this time in the third quarter of 2020. Your scenario was presented by the head of Council of entrepreneurs under the Cabinet of Ministers Andrei Zablovsky, head of Department of Analytics GK Forex Club Andrey Shevchishin, a member of the Economic discussion club Oleg Pendzin and Vice President for economic policy in the Ukrainian Union of Industrialists and entrepreneurs (USPP) Viktor Skarshevsky. Our experts give their vision in numbers, we derive the average.
While carrying out calculations, the experts took into account the updated macroeconomic forecast of the Cabinet for 2020 and assuming that the quarantine can be canceled after July 31 of this year, and he will remain accommodative.
Inflation in the third quarter
About how will change the prices in the next three months, opinions of experts were divided.
Viktor Skarshevsky and Oleg Pendzin for a year of minimal inflation, and even deflation, two Andrew – Zablovsky and Shevchishin – sure this summer because of the coronavirus, abnormal weather pattern and will differ from the usual.
“In the summer months there is a seasonal decline in prices, – argues Victor Skarshevsky. For example, in 2019 in June, July and August, in each of the months was deflation – prices fell by 0.5%, 0.6% and 0.3% respectively. Given the continuing decline in effective demand of the population and wage cuts in the third quarter of 2020 we can expect inflation ranging from 0% to 1% (September to June)”.
With him in solidarity and Oleg Pendzin, according to which deflation in the range of 0,5% per month should be in July and August. Driver of lower prices will be the vegetables and fruits that a month and a half for sure cheaper. In September, the expert sees the acceleration of inflation by 1%.
“The result for the quarter will be inflation of 0.5% and yoy 2%” – calculated Oleg Pendzin.
Opponents agree that the summer months we usually deflationary. But this year may be an exception.
“Spring weather anomalies provoked the growth of prices for some products – berries, stone fruits, vegetables, – says Andrey Shevchishin. – If you add to it the possible increase in utility tariffs (cold water, maintenance of homes), it can be expected that a small increase in inflation. In September, due to the launch of a new business season and the revaluation of the sale of goods, the expected acceleration of inflation to 2.1% in the quarter.”
Andrew Zablovsky calculated that consumer inflation in the third quarter will be 3% on the back of seasonal factors and also due to moderate growth in consumer demand after the easing of the quarantine restrictions.
The average salary
In the evaluation of employees expert opinions are more similar. The most pessimistic forecast Oleg Penzin only 9500 UAH/month with the current medium 10400 UAH. That is, earnings for the quarter will fall by almost 1000 UAH. The main reason, according to Penzina – implications of the coronavirus for which the salary is much decrease in service sphere, tourism, public catering, and household services. And in the industrial sector and transport, they are also unlikely to increase, no or little orders, and a low realization of finished products.
Andrew Zablovsky and Viktor Skarshevsky estimate the average earnings at the current level – 10300-10500 UAH.
“The decline in average wages associated with an increase in the number of bankruptcies, and falling revenues during the period of quarantine, growing unemployment, increasing wages in conditions of economic crisis”, – explained Zablovsky.
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Viktor Skarshevsky said wages are falling, according to the state service of statistics, in April 1016 at UAH in comparison with March, in may will be even lower.
“Total quarantine imposed in mid-March, 2020, in April, appeared in full stop of work of the enterprises in the sphere of trade, transport and services has led to a sharp increase in unemployment (including hidden) – analyzes Viktor Skarshevsky. – The return of hundreds of thousands of migrant workers increased the labour supply and increased pressure on lower wages. All of these factors will manifest in the coming months.”
And only Andrey Shevchishin sure that the worst is over, and the average salary at the end of the quarter will reach 11800. Growth drivers will be the exit from quarantine and the increase from July 1, social standards.
The exchange rate of hryvnia to the dollar
Analysts are nearly unanimous in the assessment of the dollar against the hryvnia: 27-28 UAH/USD by the end of September.
“I retain expectations of devaluation in the national currency: that its rate will reach 28 UAH/USD, says Andrew Shevchishin. The quarantine led to a drop in imports and demand for foreign currency from the small and medium business. And the population due to the loss of revenue was not in a hurry to buy. Trading turnover of foreign exchange market declined significantly, and stabilized low rate. But as soon as more active access of importers to the foreign exchange market – the rate will go up.”
Viktor Skarshevsky listed factors that in the third quarter will affect the rate, which is determined by supply and demand.
These factors will remain the same as in the second quarter:
- demand fell due to the reduction in imports, make it cheaper (especially energy resources);
- supply has fallen due to the decline of exports and reduction of 13.2% of foreign exchange earnings from migrant workers;
- non-residents though output currency from Ukraine by exiting government bonds in national currency, but slowly;
- foreign exchange reserves of the national Bank, it is sufficient, therefore, payments on the external debt minimal impact on the dynamics of the exchange rate;
- is the low demand for foreign currency because of declining revenues.
“In the third quarter, these trends will continue, so the course will be in the range of 26,5-27,5 UAH/USD” – summed up Viktor Skarshevsky.
National debt will not change, remaining in the range of 2.2 to 2.4 trillion UAH, experts say.
“Ukraine’s public debt (external+internal+state-guaranteed debt) in the third quarter will be 2.2-2.22 trillion UAH, – said Andrei Zablovsky. – On the General dynamics of public debt will affect payments to the IMF and domestic debt and new borrowing of the government.”
Agree with him Viktor Skarshevsky and Oleg Pendzin.
“By the end of the third quarter foreign debt will remain at the end of II quarter (about $50 billion) – will be paid as much and attracted about $2.5 billion” – more appreciated Viktor Skarshevsky.
Andrew Shevchishin called a slightly greater amount – 2.4 billion UAH at the end of the quarter.
“In the third quarter do not expect the active involvement of foreign loans, main creditors are the IMF, the world Bank, the European Commission and domestic government bonds market. Against creditors also September’s expected activity, while government bonds will simply be refinanced,” explained Andrew Shevchishin.
The cost of gasoline
Close to analysts ‘ forecasts and the prices on the most popular petrol a-95 – from 22 to 23 UAH/liter.
“The average retail price of gasoline A-95 in the third quarter to the end of the period amount of 22.3-22,7 UAH/l. the Situation in the oil market will contribute to the preservation of price stability for gasoline in the favorable situation on the world market and the low devaluation expectations”, – argues Andrey Zablovsky.
Viktor Skarshevsky also does not expect the growth of prices for oil and oil products following the start of the global economic crisis, the reduction of the world economy and demand for energy. His forecast is 22-23 UAH/liter.
Andrew Shevchishin says 23 UAH/liter gasoline A-95 will be kept only if there is no devaluation of the hryvnia, and the price of oil will remain in the range 35-45 dollars./barrel (now $ 40./barrel).
Oleg Pendzin allows a price increase during the summer by 3-5%. That is, if a liter of A-95 costs an average of 22 UAH/l, then in September can be another plus of 0.8-1.2 UAH/liter.
Gas: the average price of imports in Ukraine
But the price of gas again a large scatter of the predictions. The reason, some analysts believe that “the season of low prices,” the summer will continue, others expect it will end soon.
Oleg Pendzin called the low price of 80 dollars per 1,000 cubic meters of gas. This is 20% lower than it is now. The main reason for the decline is in Europe an excess of fuel, all storage is filled, and in Ukraine because of the warm winter saved about 25% of the resource, or up to 4 billion cubic meters.
Viktor Skarshevsky confident that the current prices – about $ 100 per thousand cubic meters – will be saved.
“In 2020, the price of imported gas decreased by half, from $196 per thousand cubic meters in December 2019 to $98 per thousand cubic meters. m in may 2020. With regard to the gas reserves in Europe (warehouse filled 69%) and the ongoing economic recession, gas prices in the third quarter will remain at $100 per 1,000 cubic meters,” argued Skarshevsky.
But the “tandem” of two Andreev – Zablovskogo and Shevchishin again has a different opinion: they predict a rise in gas prices because of increased demand for the new heating season.
“Due to the transition to fill inventory for a new topstone, as well as the recovery in oil prices, expected price increases to $ 140,” says Shevchishin.
Andrew Zablovsky is estimated that the average price could reach 130-135 dollars.
Unemployment according to the ILO
Recall: the calculation methodology of the International labour organization takes into account the percentage of unemployed among the economically active population (aged 15-72 years) and not only those who costs on the account in the employment center. That is, according to this method the unemployed is much better.
The toughest forecast in Viktor Skarshevsky: the unemployed will be almost 1.5 times more than now.
“As a result of the introduction of a total quarantine and mass return of labor migrants, the number of unemployed, according to my estimates, increased by 2 times, 1.5 – 2 million people and reached about 3-3,5 million people, or about 15-17% of the working population. By the way, according to the updated IMF forecast, the number of unemployed in Ukraine in 2020 will increase by 1.5 times – from 8.5% in 2019 to 12.6% in 2020”, – explained Viktor Skarshevsky.
Andrew Shevchishin does not expect to be unemployed so much, because the third quarter is the increase in seasonal jobs, also gradually go to Europe migrant workers. Nevertheless, the increase in the number of unemployed by more than 1% – to 9.8% – maybe.
According to Andrew Zablovskogo, unemployment in the III quarter from 9.1 to 9.2 percent:
“The growing number of unemployed will continue, as the labour market, even after the weakening of quarantine restrictions, continues to be in a state of “knock-down”, pandemic coronavirus”.
But Oleg Pendzin optimistic: he predicts that almost all workers will be able to return to Europe, and those who do not leave, you will find yourself at least temporary seasonal work. Therefore, the level of unemployment will remain in the range of 8,3-8,5%.
The accuracy of forecasts
The accuracy of forecasts in the second quarter was low – in the conditions of force majeure caused by the extension of the quarantine, the majority of real macro was unexpected.
Perhaps because three months ago in their forecasts experts thought: to lift the quarantine from June 1, but this did not happen.
The result can be considered accurate predictions of the magnitude of wages (deviation 1%), the dollar (deviation 3%) and public debt (deviation 5%). But for the rest of the macro deviation ranged from 18% to 50% and more, primarily in inflation – it was at times lower than the calculated. Therefore, the average accuracy of the previous forecast amounted to 43%.
Why the prices of vegetables and fruits in Midsummer are high and when they may be in decline, see story, “Today”: