Good king, bad nobles: despite scandals, Zelenskiy still #1
The year was off to a bumpy start. January began with the shocking news of the Ukrainian passenger plane crash in Iran. Ukrainian officials seemed unsure of how to react to this tragedy, which killed 176 people. As world leaders began blaming Iran, President Volodymyr Zelenskiy was still making vague statements. Though Ukrainian authorities knew from the very beginning that Iran had shot down the plane, Zelenskiy avoided making strong statements.
A new scandal broke soon afterward. Someone recorded a working meeting with Premier Oleksiy Honcharuk, in which the PM made a disparaging comment about Zelenskiy’s economic competence. Everyone knows that Zelenskiy’s background is as a television personality and producer. But he’s also known to be touchy about criticism. He personally vets all the jokes his former 95 Kvartal colleagues prepare about him and his family -- and indeed, he found Honcharuk’s comment 100% offensive. The Honcharuk cabinet survived this hiccup; possibly Zelenskiy was reluctant to show he could be manipulated so easily.
Then Zelenskiy replaced Chief of Staff Andriy Bohdan with one of his advisors, Andriy Yermak. Bohdan’s dismissal was positively received, as many in Ukraine saw Bohdan as Ihor Kolomoyskiy’s man. Under Zelenskiy, he’d also stepped on quite a few toes. But his replacement doesn’t seem to be an improvement.
Meanwhile, there’s been no progress with the IMF. Both bills required by the Fund—one introducing a land market and another preventing any possible return of Privatbank to its former owners—have stalled in the Rada, and there’s no clear sense of the timing of their passage.
Despite all of these scandals, Zelenskiy still enjoys strong support. Nearly 50% of voters still trust him, and his Sluha Narodu party also remains the most popular political force.
Economic indicators remain generally good, save industrial output, which fell 1.8% y/y in 2019 vs. +1.6% y/y in 2018, largely reflecting problems in global markets. Retail trade picked up 11.6% y/y in 2019, doubling 5.8% y/y growth in 2018 and reflecting soaring consumption. Inflation keeps slowing, and the hryvnia slumped at the start of the year. The NBU slashed the prime rate by 250 bps to 11%, and promised to cut it to 7% by yearend. On the back of a $2.9 billion Gazprom payment, the CAD shrank sharply. Gross international reserves were up $1 billion or 3.9% to $26.3 billion, after a €1.25 billion Eurobond placement.
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