Due to the unstable economic situation in the country, the question of what will happen to the hryvnia in 2015 has not lost its relevance for a long time. An interesting fact is that against the backdrop of important world events, such as the shale revolution, the fall in oil prices and the imposition of Russian sanctions, no one can give a reliable forecast.
What were you talking about in 2014?
The end of 2014 was difficult for residents of many countries of the world, and Ukraine was no exception. The instability of the situation pushed experts away from forecasting further developments. Only Andrei Novak, who heads the post of head of the Committee of Economists, and several other public figures dared to make an official statement.
Novak focused on the fact that loans in 2015 will not affect the change in the hryvnia exchange rate. According to him, stabilization of the situation will be possible only if any speculation in the foreign exchange market is suppressed, as well as if the strict policy of the National Bank is implemented in parallel.
According to Vladimir Staritsa, the country's leading economist, today Ukraine is in a pre-default state. The situation may become critical if Russia demands a repayment of a three billionth loan. The situation can only be mitigated by austerity and in the event of a suspension of all social benefits.
A more optimistic forecast was heard from the lips of Capital Times managing company Eric Nyman. He said that the hryvnia exchange rate in 2015 will vary in the range from 15 hryvnias to 25 per dollar, which, in fact, is happening today. If it is possible to implement all the planned reforms and attract investors, the situation will even out by the end of the year.
National Bank of Ukraine deviated from forecast
When asked about what will happen with the hryvnia, for a long time even the NBU did not dare to give an answer, since he did not submit his analyst to the Cabinet of Ministers on time. The Cabinet had to use the forecasts of investment bankers and economists, as officially announced by the Minister of Finance Natalia Yaresko. With a stable economy, the National Bank of the country annually provides a hryvnia forecast for calculating the project for the budget for next year. Prime Minister Arseniy Yatsenyuk unexpectedly for all officially announced that in the draft State Budget of the country for 2015 there is actually a proposed course, which in fact is far from the real picture. According to him, the hryvnia to the dollar should correspond to a ratio of 1:17.
Why do experts talk about further reducing the cost of the hryvnia?
Many economists confidently say that in the near future the hryvnia will continue to fall. The trend is directly linked to military operations in the east of the country. And here it’s not even that funds from the budget go to support compatriots who have defended the country. The reason for the phenomenon lies in the fact that the events of the last year caused the closure of a number of enterprises in the east. According to preliminary estimates, it is in this part of the country that about 15-25% of companies that previously formed the state’s export capacity are concentrated. Their closure led to a reduction in the influx of currency into the state.
It is worth saying that it is in the east that the country's largest agglomerations are located, which previously acted as active consumers. Despite a stabilizing balance of payments, imports fell along with the purchasing power of the population. The trend is that until the situation in the east changes, the Ukrainian hryvnia exchange rate, the dynamics of which has recently indicated a temporary correction, will continue to decline in the near future. Do not forget that this is only one of the likely scenarios.
Hryvnia depreciation due to events in the financial market
The forecast of analysts considering the question of what will happen to the hryvnia this year is widespread, which speaks of its further decline and even devaluation due to dramatic changes in the Ukrainian financial market. As prerequisites for the depreciation, consider the mass withdrawal of investments from the state, which are 90% related to people who previously held power. The outflow of funds has caused pressure on the course.
The outflow of capital from banks and conversion into dollars
The Ukrainian hryvnia, the price of which has fallen significantly over the past six months, will continue to decline due to a lack of confidence in the financial sector. Over the past year, provisional administration has been introduced in more than 30 banks in the country. According to preliminary forecasts, a similar fate threatens at least 30 financial institutions. People receiving from their deposit insurance fund in the range of 200 thousand hryvnias immediately change them to currency, which only creates demand and makes the dollar grow in value. Based on the panic prevailing in society, and starting from people trying to save their capital, analysts say that the Ukrainian hryvnia will only weaken.
Bold forecasts of analysts and economists
Trying to find the answer to the question of what will happen to the hryvnia in 2015, experts set the bar at the level of 40-50 hryvnias per dollar. Such a future, scary for many, stems from the impossibility of using international tranches to boost the economy or to replenish the gold and foreign exchange reserves, as the help of foreign partners hardly covers Ukraine’s external debts .
The fact that the National Bank has been systematically refinancing for over a year, the amount of which has already reached 1 billion hryvnia, makes us consider negative scenarios. This is an actual increase in the money supply in the country, an increase in supply on the market and, accordingly, a drop in the value of the monetary unit. We can talk about panic, about the almost complete sale of the gold and foreign exchange reserves and the military conflict, which do not allow specialists to make optimistic forecasts.
What are the experts talking about in the news?
In the media, information is often repeated that the worst-case scenario will be the one in which the hryvnia to the dollar will correspond to a ratio of 1:25. If we take into account the fact that such a rate has already taken place on the black currency market, we can talk about working out the scenario. Many experts recommend not to rush and focus on the high probability of a trend repeating. The situation is viewed in a negative way when the International Monetary Fund refuses to issue loans. At the moment, it is external sources of funds that are the only way for the country to block the state’s needs for next year. According to preliminary estimates, the country needs from 25 to 26 billion dollars of material support. Only 11-12 billion is able to allocate the IMF. Based on this fact, economists do not say with certainty how much the Ukrainian hryvnia will cost in the near future, since its fate largely depends on the decisions of the international financial institution.
What moods make forecasts?
The hryvnia forecast is directly related to the situation, which is most likely to unfold in the country. Based on the negative shades of the most likely scenarios, we can talk about the upcoming acceleration of inflation by about 5%. Unemployment growth could reach 10%. Difficult times will begin in the labor market. There is a high probability of raising the retirement age. In this case, the minimum income will remain at the same level. If the IMF gives a loan, the government will be forced to raise tariffs on housing and communal services. In particular, the payment of electricity, hot and cold water will cost four times more. Rising food prices will become a natural phenomenon. Despite the fact that forecasts remain forecasts and the situation in the country can change dramatically after the intervention of wealthy partners at any time, people do not cease to panic and worry.
How to implement a forecast with a rate of 12 hryvnia per dollar?
In one of his speeches, Ustenko officially announced that the hryvnia, whose schedule had recently been directed to the north and even hit the mark of 25 units for 1 US dollar, has every chance to roll back to the figure of 12 hryvnia per dollar. To achieve this goal, it will be necessary to implement a whole range of modernizations that will affect almost all areas of life. The forecast will turn out to be real if we cut government allowances for the official salary of civil servants and reduce subsidies, weaken the impact on domestic business, which will lead to the return of capital to the country. The forecasted situation will become more real if costs are minimized and austerity is established.
Temporary lull or real hryvnia strengthening?
If at the end of 2014 and at the beginning of 2015, most of the forecasts that affected the ratio of the hryvnia to other world currencies had a negative connotation, today the mood in society has changed significantly. A sufficiently large percentage of forecasters ceased to predict the growth of the dollar, counting on a narrowing of the exchange rate band to a range from 21.5 to 23.5 hryvnias per dollar. This trend, in which the Ukrainian hryvnia will continue to rise in price, is supported by the fact that by the end of the first quarter many enterprises had to pay taxes, which caused a reduction in the money supply in the market. Moreover, the NBU itself artificially reduces the amount of funds in the markets, encouraging banks to sell foreign currency. It is too early to talk about stability, but positive assessments of the situation are very encouraging.
What could happen by the end of the year?
By the end of 2015, the situation with the hryvnia in the foreign exchange market may acquire three development formats. With a balanced outflow of capital and provided that the IMF does not stop investing, by the end of the year the national currency will be at a level of 27 to 29 hryvnias per dollar. If the outflow of capital from the country maintains the level of the end of 2014, we can safely prepare for the indicator of 32-35 hryvnias for one US dollar. With an increase in the outflow of capital from the country by several times, the situation can be very frightening, one of the toughest forecasts at the level of 50 hryvnia for one dollar can become quite real. The decline in the rate of 1–1.5 times is associated with the desire of the population to transfer their savings into dollars and hide them under the pillow. The hryvnia to ruble ratio is not so relevant today, because Russia, like Ukraine, is going through difficult times today.
To summarize, or do forecasts for the future make sense?
Based on the foregoing, it can be noted that the analysis of the situation in the country did not provide analysts and economists with the opportunity to lean toward a single forecast. Opinions of both politicians and specialists diverge dramatically. The answer to the question regarding how the hryvnia will be related to the ruble, to the dollar, to the euro, no one is more likely to give. This is due to the instability of the economic situation and the inability to predict the actions and decisions of the IMF, which directly affect the exchange rate of the national currency.
It is very interesting that at the time when analysts were talking about the fall and devaluation of the hryvnia by the spring, it began to grow stronger. Today, there is talk of strengthening the national currency, but no one dares to insist on it. The hryvnia, the schedule of which has been directed north since the beginning of the year and only recently rolled back and froze, can become active and go to one side at any time. This can contribute to both external causes, important world events, and economic phenomena within the country. The difficult and controversial situation in the global economy is making its adjustments to the hryvnia.