At an extended meeting of the government, President Viktor Yanukovych promised to create a body that would monitor online any approaching global economic crisis to Ukraine. Like the previous government, the current one is alluding to an economic crisis that would have its origins far beyond the borders of Ukraine, and while no one wants to see anything like the Great Recession again, what is happening now in the country is very reminiscent of 2008.
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| PHÎÒÎ: shutterstock |
Ukrainians pulling their savings out of banks
This past September for the first time in the past two years the outflow of money from individual deposits increased. The widespread withdrawal of national currency savings from bank accounts is happening on a mass scale, which has resulted in a record-high purchase of foreign currencies. According to the most recent statistics of the NBU, people bought US $2.9 bn more than they sold. The last time such a volume of cash was bought up was in the fall of 2008.
Central bank reserves are dwindling
In September the gold reserves of the National Bank of Ukraine unexpectedly began to “melt”, to put it mildly. Within a month the reserves fell by US $3 bn from US $35 bn. According to experts, in October the situation did not stabilize and the country’s gold reserves fell by another US $3 bn.
Demand for Ukrainian steel plummeting
The steel industry, which has long been the driver of the Ukrainian economy, is suffering low sales on markets abroad. Indeed, the prices of metal products sold by Ukrainian steel mills began to drop in the middle of September and those prices continue to fall. For example, the export price of pig iron fell by nearly 80% in September alone.
Western banks fleeing Ukraine
Ukrainian affiliates of European banks might face troubles in connection with the financial crisis in the Eurozone. According to the plan for the recapitalization of banks approved by European officials, financial institutions in the Eurozone will be forced to increase their capital by EUR 106 bn, cover their deficits with government assistance and lower dividends or the sale of foreign assets. Rumors are already circulating on markets about the upcoming mergers and acquisitions of several European banks in Ukraine with the aim of increasing capitalization.
Nobody wants to lend money to the Cabinet
For nearly half a year Ukraine’s Finance Ministry has not been able to place its paper on the domestic market, which forced the Cabinet to try place hard currency T-bills. In short, this means the national currency of Ukraine is being snubbed in favor of the almighty dollar when it comes to repayment of debts.
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