Kerch Crisis Economic Fallout

Martial law will have no fundamental influence on the economic growth of Ukraine in 2018/19

Executive summary:

According to the results of the first two days, IMF Group Ukraine has already draw a preliminary conclusion that the so-called Kerch Crisis, which has arisen and the subsequent transition to a hybrid martial law, will have no fundamental influence on the economic growth of Ukraine in 2018/19.

The observed short-term hryvnia devaluation is purely hype and not supported by any objective factors. Therefore, with a competent response from the National Bank of Ukraine (NBU), the exchange rate in the next 7–10 days should stabilize and return to previous values.

By indirect evidence, one can also say that martial law in no way affected the stability of the banking system and the level of interest rates will remain on a declining trend. As for the quotations of Ukrainian public companies, both listed on the Ukrainian stock exchanges and on foreign stocks should soon recover after a 3–5% drop, because, as in the case of the exchange rate, such a drop has no objective economic …