Ukrainian banks during the crisis

About the debt of the Ukrainian banking sector to creditors:

Першим банком, що оголосив дефолт за зобов'язаннями, став банк "Фінанси та Кредит", який у березні 2009 року не зумів повністю розрахуватися за синдикованою позикою у розмірі 70 мільйонів доларів, організаторами якої були Standard Bank, Raiffeisen Zentralbank та "Банк ВТБ".

Governance matters 2009 is out

Comparison of governance indicators for Ukraine in 1996, 2004, and 2008 are quite as I expected.

Voice and accountability is the area where Ukraine is quite advanced and the major improvement happened after 2004. Actually, I think that it should be above the median in 2008.

Rule of law and control of corruption are the weakest links. The rule of law has not improved since 1996 -- I agree on that. I would say that it did actually deteriorated since 2004.

What is surprising is the level of political stability in Ukraine. I would disagree that there is political stability at the level close to the median country. I would also disagree that it improved since 2004. It is quite shaky over here.

First quarter GDP is finally announced!

Probably the Ukrainian Statistical Commettee could not take it any longer and finally announced the 1st quarter GDP. So, here it goes:

Ukraine experienced a 20.3% decline in GDP relative to the first quarter of 2008. It is a record drop among all European countries and very likely the absolute record worldwide.

It all came despite goods reults in agriculture. I wonder how would it look like if we had a poor weather last Fall.

Construction industry just collapsed with 54% drop and manufacturing followed with 36% drop.

Ukraine proves the point made by Brender and Drazen

Adi Brender and Allan Drazen in AER 2009, "Consolidation of New Democracy, Mass Attitudes, and Clientelism":

"We found that in new democracies annual government expenditure reported immediately after the election year was significantly lower than finalized data; in nonelection years, it was unchanged. (In contrast, in established democracies initial and final reports were similar for election an nonelection years.) This comparison is not conclusive, but suggests that new democracies provide a lowe quality of data to their citizens in election years.

...In Brender and Drazen (2007), we found that democracy is almost three times more likely to collapse in election years than in nonelection years in new democracies, while in olde democracies the probability of a collapse of the democratic regime is very small, with similar values in election and nonelection years."

CPI in Ukraine, January-May

Overall, CPI increased by 7.4% in the first five months of the year. Traditionally, summer is less inflationary due to deflation of local fruits and vegetables but we are going to be in double digits anyway -- somewhat closer to 20% (probably 16-17%).

Consumer prices in Ukraine, relative to Devcember of 2008
Category	Consumer price
CPI	107.4
Foodstuff	107.7
Alcohol and tobacco	112.9
Clothing and footware	104.4
Utilities	103.1
Consumer goods	111
Medicine	121
Transport	109.7
Telecom	102.7
Entertainment	107.9
Education	101.4
Catering and hotels	105.9
Other goods and services	112.6

Consumer product prices grew at 11% due to large share of imported goods and hryvna devaluation. The same is true for medicine because large part of drugs is imported. Alcohol and tobacco prices increased due to increases in taxes on tobacco products.

What all cities have in common?

I like the idea to find something all cities have in general:

http://understandingsociety.blogspot.com/2009/06/what-cities-have-in-common.html

Back to the USSR

Можно ли оскорбить партию? Да, если партия называется "Единая Россия":

В ответ на критику Рахимова заместитель секретаря президиума генсовета "Единой России"Андрей Исаев заявил, что президент Башкирии своими высказываниями "нанес оскорбления" партии и что он будет лично настаивать на исключении Рахимова из партии. Комментируя интервью президента Башкирии, Исаев также отметил, что "в определенном возрасте некоторые мозговые реакции наступают запоздало".

The National Bank of Ukraine -- the Central Bank of Ukraine -- is very conservative. Unlike other CBs in CIS countries -- Russia, Kazakhstan, Armenia -- it does not have a strong research department and does not have western PhD trained staff. When things looked good the NBU was efficient in every day routine management but when the financial crisis reached Ukraine they really had no clue of how to manage it. It will be interesing to learn what is the opinion of international auditors on the actions of the NBU:

KIEV, Ukraine (AP) — International auditors will probe the actions of Ukraine's central bank during the ongoing financial crisis in an effort to counter accusations of mismanagement and corruption at the bank, a bank official said Wednesday.

Hong Kong in Ukraine?

Michael Perelman reports:

 

Romer is suggesting that less developed countries contract with capitalist nations to set up Hong Kong’s for them.

"Romer suggests that we rethink sovereignty (respect borders, but maybe import administrative control); rethink citizenship (support residency, but maybe import voice in political affairs); and rethink scale (instead of focusing on nations, focus on cities—on city states like Hong Kong and Singapore.)

Paul Romer proposes that developing countries could invite instant Hong Kongs—new cities in new locations run by experienced governments such as Canada or Finland.  They would enrich the country where they are built as special economic zones while also rewarding the distant government that makes the investment of building the new city state and installing a set of fair and productive rules.  Over time, as with Hong Kong, the new city is turned over to the host country.

The idea is getting some traction in the developing world.  This summer Romer is going public with a Bridge Cities Institute website for further exploration and eventual application of the idea."

 

I would build a brand new city somewhere in Crimea or on the Black Sea coast in Nikolaev or Odessa region under jurisdiction of EU. It is similar to Free Economic Zones but with right of control of foreign government rather then local authorities.

CIS in 1st quarter of 2009

In% relative to the first quarter of 2008

	GDP in constant prices	Industrial production in constant prices	Index of producer prices	CPI	Retail sales in constant prices)
Azerbaijan	104,1	97,8	60,6	108,3	110,0
Belarus	101,1	95,5	120,9	115,4	105,9
Armenia	93,9	90,5	92,6	102,0	103,9
Georgia	...	…	96,3	102,7	…
Kazakhsatn	95,5	95,4	71,4	108,8	96,6
Kyrgystan	...	80,5	114,3	116,2	100,8
Moldova	107,2	75,8	96,7	103,2	95,7
Russia	87,7	85,7	94,3	113,7	98,9
Tajikistan	103,5	91,8	86,1	110,7	116,2
Uzbekistan	107,9	109,9	…	…	…
Ukraine	...	68,1	117,3	120,4	88,2
CIS	89	85	96	114	98

Ukraine expands its trade with China and India

Despite 40% decrease in value of trade in the first quarter of 2009 relative to the first quarter of 2008, Ukrainian exports to India  and China has been tripled. The largest drop in exports occured with Americas (by 70%), Russia (54%) and with Europe (by 45%)

External trade of Ukraine

Worst days are over?

Phoenix Capital reports

Аналитики: Для украинской металлургии буря уж�:

"Основные тенденции апреля:

- Спрос на украинскую металлопродукцию увеличивался, главным обра­зом, в сегменте длинномерного проката;

- Азовсталь, АрселорМиттал Кривой Рог и Енакиевский металлургический завод увеличили суточную выплавку стали, в то время как остальные круп­ные производители существенно сократили объемы производства;

- Стоимость сырья (за исключением коксующегося угля) снижалась

...

Ожидания на май-июнь:

- Рост спроса и цен на длинный и плоский прокат продолжится;

- Основными рынками сбыта для отечественных металлопроизводителей останутся Турция и другие страны Ближнего Востока, а также страны Юго-Восточной Азии;

- Большинство металлургических комбинатов не снизят объемов производ­ства в мае; ММК Ильича, Запорожсталь и Алчевский МК, вероятно, увели­чат выплавку стали на 8-10% уже в мае;

- Низкие цены на сырье позволят отечественным металлопроизводителям сохранить конкурентоспособность на зарубежных рынках;

- Крупнейшие меткомбинаты останутся прибыльными, рентабельность по EBITDA в мае-июне составит около 15-20%.

At the same time on year-to-year basis, export in the first quarter is 40% lower than in 2008

Barry Eichengreen on risk management failure:

Of course, risk officers could have pointed out that the models had been fit to data for a period of unprecedented low volatility. They could have pointed out that models designed to predict losses on securities backed by residential mortgages were estimated on data only for years when housing prices were rising and foreclosures were essentially unknown. They could have emphasized the high degree of uncertainty surrounding their estimates. But they knew on which side their bread was buttered.

Глава сельсовета в Киевской области попалась �

Глава сельсовета в Киевской области попалась: "В Бориспольском районе Киевской области задержали председателя сельского совета, которая требовала почти 1 миллион гривен взятки за содействие в выделении земли. Однако, местная прокуратура отказала в возбуждении уголовного дела."

"Фактически, средства в сумме 960 тысяч гривен, которые председатель сельсовета требовала от частного лица, должны быть внесены им наличными в кассу спецпредприятия для проведения ремонта дорог.

В свою очередь, руководитель этого предприятия должен был выполнить минимальный объем работ для того, чтобы показать депутатам видимость определенной работы по благоустройству села – освещение одной улицы на общую сумму 49 тысяч гривен. Разница, в минус один процент, поступила бы председателю сельсовета."

Unless there is a market for land and honest courts, I do not see how the situation in Ukraine is going to improve.

Good Government and Animal Spirits - WSJ.com

Akerlof and Shiller on the role of beliefs in economic cycles

Good Government and Animal Spirits - WSJ.com: "entrepreneurs and companies do not just sell people what they really want. They also sell people what they think they want, and not infrequently what they think they want turns out to be snake oil. Especially in financial markets, this leads to excesses, and to bankruptcies that cause failures in the economy more generally. All of these processes are driven by stories. The stories that people tell to themselves -- about themselves, about how others behave, and even about how the economy as a whole behaves -- all influence what they do. These stories vary over time."

Ukraine exports more agriculture

Ukraine exports more agriculture as it should given its comparative advantage. Exports of vegetable products from Ukraine (sectors 6-14 HS ) in January-February 2009 grew by 460% in comparison to the same period of the previous year. Export of cereals grew almost 10 times.

However, the overall export dropped by almost 40%. This happended because exports of iron and steel (sector 72 HS) which contributes a third to the overall export dropped 50%.

As a results the share of iron and steel in total export dropped from 35% to 29% and the share of agriculture and food grew from 13% to 25%.

IMF World Economic Outlook

Current recession particularly hit resededntial investments, stock market, and private consumption. Government responce was much stronger to counter the severity and magnitued of the crisis.

Retail sales in Ukraine

Retail sales dropped by 17% in January-March, 2009 relative to January-March, 2008. Sales in March have increased by 9% relative to February.

Actually, it is quite surprising to me that decline in retail is not as deep as in other areas. Of course, there is a consumption smoothing but given hryvna devaluation,  decline in imports, and overall collapse of production it is a good sign that the economy might start to recover.

Кабинет Министров на заседании 14 апреля принял решение о введении института первичных дилеров на рынке государственных ценных бумаг.

"Такие действия позволят внедрить в Украине передовую мировую практику сотрудничества Министерства финансов и банковских учреждений в сфере развития рынка государственных ценных бумаг, обеспечить финансирование государственного бюджета и улучшить управление денежными ресурсами единого казначейского счета", - говорится в сообщении.

This is an action in the right direction but it is long overdue. The government should have developed the market for local government bonds long time ago when times were much better. It is really hard to develope during the crisis.

About the current financial crisis:

Сверля жемчужину познанья, тьмы образованных тупиц

Вели о небытье гаданья, тома слагая небылиц.

Но как ни тщились, не смогли увидеть тайны мирозданья ...

Потягивались, лбы скребли и падали, зевая, ниц.



Рубайат # 0666