Business Update: April 2 – Central bank sends $1.55 billion to state budget, Ukraine gas transit halved

The National Bank of Ukraine has transferred $1.55 billion in banking profits to the state budget, the central bank said. The banking and financial sector regulator made the full transfer on April 1. It took place earlier than expected and amounted to some $72 million more than previously planned. Ukraine’s state-owned banks are its largest and most profitable and they pay about 90% of their profits back to the state in the form of a yearly dividend. 

UAH 42.72 billion in profit for 2019 was sent to the national budget, according to the NBU Facebook page. “This year, in agreement with the Ministry of Finance, it was decided to transfer the entire amount of the National Bank’s profits to the state budget,” the post says, adding that was one way in which the regulator can help the government to overcome economic challenges caused by the COVID-19 pandemic. “The State Budget now has a significant financial burden… fighting COVID-19 in the country,” the NBU stated. 

Bank of America expects Ukraine’s GDP to shrink by 5.6% in 2020. BofA analysts have given Ukraine one of its most negative forecasts, according to a review from the investment bank, as reported by Interfax. The forecast comes only a few days after the investment bank J.P. Morgan predicted that Ukraine’s economy would shrink by only 2.6% this year before probably bouncing back in 2021. The most recent government forecast predicts a 4.6% drop in Ukrainian GDP. 

BofA also downgraded its GDP expectations for the European Union and China, and revised the forecast on GDP for the EEMEA region (Eastern Europe, the Middle East and Africa). The spread of coronavirus and drops in consumer demand will affect many countries throughout 2020, the bank predicted. 

Ukraine’s entrepreneurs talked with the Kyiv Post about their struggles amid the COVID-19 shutdown. Read what they had to say here. 

Culture and education are to suffer from budget cuts during the COVID-19 pandemic. As Ukraine enters the fourth week of its COVID-19 quarantine, the country is planning to tighten its belt and cut many expenses, while getting ready for deficit-busting spending in a budget that was planned to be about $50 billion for 2020.

Gas transit through Ukraine is down 53% in the first quarter of 2020. The transit through Ukraine, which usually earns the country some $3 billion in yearly fees, has amounted to only 11.1 billion cubic meters so far this year. (In January – 2.5 billion, February – 4 billion, March – 4.6 billion cubic meters). These volumes are about half of the average amount for January-March for the five years of 2014-2019, Liga.net reports, citing new official data.

Transit is falling because one of the world’s largest gas producers, Russia, is using new methods of export. Bypass of Ukraine by Russia’s TurkStream pipeline, for example, means that transit volumes to the south (Romania, Bulgaria, Turkey, the Balkan countries) through the Ukrainian gas transmission system have fallen 10 times in comparison to averages from the last five years. In the westward direction (Slovakia, Poland, Hungary) 9.8 billion cubic meters of gas were transited, which is 7.2 billion or 42% less than the results from the same period a year earlier.

Five Ukrainian pharmaceutical companies are ready to produce medicines for treating COVID-19. They can produce a number of drugs that have been proven effective in combating the symptoms of coronavirus, according to Mykhailo Radutsky, head of the parliamentary committee for health. “Now all legal grounds are being made for Ukrainian pharmaceutical manufacturers to start producing medicines that are used in other countries, but there is great shortage and high cost of such medicines. Today, this is a problem not only in Ukraine,” he said in an interview on Channel 24 on April 2. 

Of those currently infected with COVID-19 in Ukraine, 57 are children, the Public Health Centre has confirmed. As of 10:00 on April 2, COVID-19 coronavirus infection was confirmed in 57 children and 747 adults, the center reported on its Facebook page. According to the report, a total of 398 people – or about half – have been hospitalized, of which 15 are in need of lung ventilators. 

The price of Russian oil has fallen to nearly $10 a barrel on April 2, while the price of a barrel of crude elsewhere fell to about $23. Due to lower international prices, the Russian oil suppliers have had to deliver oil into the pipeline at their own expense. This means that the cost of transportation, payment of export duties and some other expenses exceed average costs, resulting in record-setting low prices. 

But the price may not be low enough for Belarus, which wants to pay $4 a barrel for new imports of Russian oil. In April, Belarus expects to receive 2 million tons of Russian oil at a price of about $4 per barrel, Belarusian Prime Minister Sergey Rumas, said, according to the state-owned news outlet. BelTA. “I think… will finish negotiations with Russian companies on oil supplies for April. We expect to get 2 million tons,”  Rumas said. Belarus and Russia had until now failed to agree on new terms for the supply of Russian oil. Talks were taking place to have oil pumped to Belarus through Ukraine’s transit system. 

Gas output by Russia’s state-owned Gazprom plummeted 18% during March, Interfax reports. It also fell 5.3% in February and 6.5% in January.