Western Balkans citizens legally resident in EU equal to 14% of region’s population
International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
Consumer confidence index drops q/q, y/y in 4Q20
M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report
Russia’s grain harvest may fall to 131mn tonnes in 2021 from 133mn tonnes in 2020
ING: Russia balance of payments: supportive of ruble in the near-term, but risks for 2H21 mount.
Western Balkans and Ukraine urged to scrutinise coal subsidies
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
Private finance mobilised by development banks up 9% to $175bn in 2019
VISEGRAD BLOG: Central Europe's populists need a new strategy for Biden
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
Hungarian vehicle makers hit by supply chain shortage
COVID-19 and Trump’s indifference helped human rights abusers in 2020
OUTLOOK 2021 Poland
OUTLOOK 2021 Slovakia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
FDI inflows to CEE down 58% in 1H20 but rebound expected
BALKAN BLOG: US approach to switch from quick-fix dealmaking to experience and cooperation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
BALKAN BLOG: The controversial recipe for building up Albania
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING: Growth in the Balkans: from zero to hero again?
Spring lockdown caused spike in online transactions in Croatia
Labour demand down 28% y/y in Croatia in 2020
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Moldova
Storming parliaments: New Europe's greatest hits
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Montenegrins say state administration is most corrupt institution
North Macedonia plans to cut personal income tax in IT sector to zero in 2023
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
OUTLOOK 2021 Slovenia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Turkey’s benchmark rate held as concerns over faltering recovery come to fore
Turkish lira breaches HSBC’s stop-loss, Turkey ETF signalling outflows
ISTANBUL BLOG: Biden must find a way to work with Trump’s strongman pal Erdogan
CAUCASUS BLOG : What can Biden offer the Caucasus and Stans, all but forgotten about by Trump?
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Iran’s technology minister indicted for failing to properly implement internet censorship
No US move to rejoin Iran nuclear deal imminent say Biden national security nominees
TEHRAN BLOG: Will Biden bet on a quick return to the Iran nuclear deal?
Tehran Stock Exchange chief quits amid “Black Monday” fury
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
Download the pdf version
2020 will be a big year for Ukraine as there is a possibility that some sort of peace deal could be reached with Russia and the effects of the first round of reforms made by the new Ukrainian President Volodymyr Zelenskiy’s administration start to kick in.
The new government was off to a fast start introducing a hectic legislative programme on its first day in office on August 29. Over 500 new laws were tabled with strict deadlines for at least draft versions to be submitted to the Verkhovna Rada in November, December and by January 1. More laws will be tabled during 2020 as Zelenskiy attempts to capitalise on his high popularity to get as many painful reforms through the Rada before his honeymoon is over.
Zelenskiy has two main items on his agenda: bring an end to the fighting in Donbas and raise income levels and kick start economic growth. And he made progress on both fronts in 2H19.
The Normandy Four (N4) process between Ukraine, Russia, France and Germany restarted on December 9 with a meeting in Paris where Zelenskiy, who has no experience in international politics, purported himself well, securing a ceasefire and an expanded no-contact zone and agreeing an all-for-all prisoner swap before the end of 2019.
The new president needed to do two things at his first meeting with Russian President Vladimir Putin: get some sort of concrete results that he can show to the Ukrainian people and not give too much away in concessions to Putin. He managed both.
Russia and Ukraine exchanged 203 prisoners on December 29, in, which 76 Ukrainian citizens – being held in the occupied territories of Donetsk and Luhansk – were traded for 127 Russian-aligned prisoners held in Ukraine. Four Ukrainian citizens reportedly declined to return, while 14 Russian-aligned prisoners also declined to return.
Among the Russian-aligned prisoners was a Brazilian citizen (Rafael Lusvarghi) fighting with the Russian-backed forces, five former police officers (with the liquidated Berkut special forces unit) suspected in the killings in the EuroMaidan protest of 2014, a suspect (Maksym Mysiak) in the murder of three Kharkiv businessmen in 2013-2014, and three suspects accused of organizing a terrorist attack in Kharkiv in February 2015 that killed four EuroMaidan supporters. Another 300 Ukrainian citizens remain imprisoned in Russia and Donbas, said Valeria Lutkovska, Ukraine’s representative to the humanitarian subgroup of the Trilateral Contact Group.
While the Paris meeting was an encouraging start and showed that both sides are willing to negotiate and make goodwill gestures, the substance of a final peace deal was put off until a second N4 meeting slated for April.
While the talks between Putin and Zelenskiy caught the headlines, it is highly likely that a broader deal was cut between Russia, France, Germany and Ukraine that laid out a road map for removing sanctions. The outgoing US ambassador to Ukraine William Taylor, Jr. speculated in an interview just before New Year’s Eve that a peace deal could be agreed over the next two years. And there is a possibility of some easing of sanctions in the summer of 2020 when the current sanctions regime expires.
At that meeting the tougher nuts need to be cracked: when will control of the border be returned to Kyiv (Zelenskiy: before elections in Donbas; Putin: after elections), changes to the Ukrainian constitution (what sort of special status will be granted to Donbas); an amnesty for everyone involved in the conflict; and the details of the Steinmeier Formula, which is the mechanism that will be used to deescalate the fighting.
By putting these questions Zelenskiy has bought time for his diplomats to work on all these difficult issues. Going up against the Russian diplomatic corps would be a daunting task for any country, but Zelenskiy faces Putin with the weight of the German and French diplomatic corps at his side, which is more than the equal of the Russian service so a deal is possible and even likely.
One of the biggest political issues facing Ukraine was solved in December when Kyiv and Moscow agreed a new gas transit deal. Russia agreed to send 65bcm over Ukraine in 2020 falling to 45bcm after that. This is about half the 90bcm Russia has been sending in recent years. The revenue Ukraine earns from transit will fall from $3bn a year to $2bn. However, as Gazprom intends to increase exports to Europe by 70bcm in the medium term and the new pipeline’s it has built are already fully utilized there is scope for the transit volumes across Ukraine, which can cope with a maximum of 140bcm a year, to grow.
Ukraine transited 87bn cubic metres (bcm) of gas to Europe in 2018 and is on course to send 90bcm in 2019. The combined capacity of Nord Stream 2 and Turkish Stream (aka TurkStream) is 85bcm so Russia needs some Ukraine capacity.
On the economic front things are looking much better. The economy has been stabilised, inflation is falling fast and incomes are starting to rise, albeit from a very low base. If anything the National Bank of Ukraine (NBU) has been too successful with bringing down inflation as the over the course of 2019 the hryvnia strengthened by some 17% making it one of the best performing currencies in the world. By the end of the year the strong hryvnia was starting to hurt exporters and the NBU began to intervene in the market to restrain the currency’s appreciation and the regulator made a series of very big rate cuts, but thanks to the rapid fall in inflation Ukraine still had one of the highest real interest rates in the world.
The falling rates and inflation, and the strong currency, proved irresistible to bond investors who in 2019 were given direct access to the Ukrainian capital market after it was hooked up to Clearstream. Foreign investors poured some $4.5bn into the domestic bond market as a new source of funding became available to the government.
Ukraine’s debt profile changed as the five year delays on Ukraine’s external debt negotiated by former finance minister Natalie Jaresko expired and debt repayment jumped up. But between the $14bn of remittances from workers abroad and the booming domestic debt market, analysts are confident that Ukraine can meet its obligations in the coming years.
Gross international reserves (GIR) had risen to about $22bn by the end of 2019, or 3.4 months of import cover, and should increase again in 2020.
The International Monetary Fund (IMF) also signed off on a new $5.5bn Extended Fund Facility (EFF) in December (although this still needs to be approved by the board, which probably won’t happen until February) that will help pay off debt and gives Ukraine access to better terms on the international capital market. The Ministry of Finance raised $4.2bn on the bond markets in 2019 and plans to raise about the same in 2020.
There remains some uncertainty over closing the IMF deal thanks to oligarch Ihor Kolomoisky’s attempts to take back control of PrivatBank that was nationalised in December 2016, but the Zelenskiy administration has made it clear it will do what is necessary to ensure the IMF deal is closed although the wrangling over the terms could well drag on for most of the first quarter of 2020.
This is an excerpt from bne IntelliNews’ Eastern Europe Outlook 2020, covering Russia, Ukraine and Belarus. The full version will be available in pdf format in the coming days.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: