Macro Analysis /

Ukraine: Zelensky’s progress report

    Stuart Culverhouse
    Stuart Culverhouse

    Head of Sovereign & Fixed Income Research

    Tellimer Research
    2 July 2019
    Published by

    President Volodymyr Zelensky has now been in office for just over a month. In this report we give our verdict.

    Parliamentary elections: In one of his first acts, Ukraine’s new President Volodymyr Zelensky called for early parliamentary elections (due 21 July), which will offer him the chance to form a legislature that supports his policy agenda. He will want to show quick results, especially on tackling corruption. Opinion polls suggest Zelensky’s new Servant of the People Party should do well in the coming election (Figure 1), although it is not clear whether he will secure an outright majority. If not, Zelensky will have to form a coalition to govern or rely on possibly fragile alliances.

    IMF programme: The new IMF programme has ground to a halt ahead of the first review, as the Fund wants to wait for the elections before being able to move forward. In fact, the finance minister said that a new programme is likely after a new government is formed, confirming previous reports that suggested Ukraine would seek to terminate its existing programme and develop a new one. This may make sense since a new government will want to design its own economic programme in its own vision. But it could add to uncertainty and funding pressures.

    Investment recommendation: Ukraine bonds have rallied strongly since May, with yields of 8% on the UKRAIN US$ 28s (Figure 2). We think this is pricing-in a lot of good news. We have a Sell on the bonds, downgrading them (at higher yields) in mid-April after the IMF Spring meetings.

    Parliamentary election voting intentions (% of vote)

    Source: Bloomberg. Some parties omitted for ease of presentation.

    This report on Ukraine is derived from our recent EM macro conference call, held on 26 and 28 June. If you would like a recording of the full call and the associated presentation, please contact or your Tellimer contact directly.