Moody`s forecast for Ukrainian banks improves

Tuesday, May 31, 2016 - 21:10 (EEST) Section: Latest news

Moody`s Investors Service has today changed the outlook for Ukraine`s banking system to stable from negative.
”The change in outlook reflects our view that the economy will begin to emerge from a deep recession in the coming 12-18 months , which will help contain further asset quality deterioration,” reads the agency`s announcement published May 31.
According to the Moody`s estimates, improved funding conditions will ”support core lending, and the local currency`s recent stabilisation will help slow the decline in banks` solvency.”
Moody`s suggests Ukranian banks ”have accumulated liquidity cushions which, as of year-end 2015, were large enough to cover 84% of cross-border debt service payments coming due in 2016 and a series of distressed debt exchanges that took place in 2015 shifted major wholesale debt repayments to 2018-19.”
However, Moody`s notes that However, expected economic recovery will not likely be strong enough to reduce the stock of problem loans, which amount to 45% of rated banks` gross credit exposures in 2016. As a result, credit losses will remain high, especially when including losses that have been deferred in previous years to help slow the decline in capital.
As UNIAN reported earlier, Moody`s international rating agency said it expected a resumption of economic growth in Ukraine in 2016 and 2017 after a cumulative real GDP fall of about 15% in the last two years, according to a posting on the agency`s website.
Ukraine`s GDP in 1Q 2016, according to operative data of the State Statistics Service of Ukraine, taking into account the seasonal factor, decreased by 0.7% compared to the previous quarter and rose by 0.1% yoy
The National Bank of Ukraine predicts real GDP growth in 2016 at 1.1% with the inflation rate of about 12%.
The International Monetary Fund, Ukraine`s key creditor, has maintained its economic growth forecast for Ukraine in 2016 at 1.5% and inflation at 15.1%. The World Bank projects the Ukrainian economy will grow 1% and inflation will stay at 15%.
According to the expert consensus forecast compiled by UNIAN, Ukraine`s economy will grow by 1% this year amid a 3% increase in industrial production and 19% inflation.