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Macro Review-In Transition

Politics still in transition: Timing of new IMF deal uncertain. With early parliamentary elections, there is a strong likelihood that Ukraine will resume cooperation with the IMF in November-December. This is our base case, and we expect the Ukrainian government will receive EUR500m of macrofinancial aid from the EU and raise US$1-2bn from the markets before YE2019. However, creation of a coalition, formation of the government, and finally negotiations with the IMF could take longer than expected and postpone needed FX inflows until 2020. So far, markets have had little clarity about what the economic policies of the new authorities will be. These uncertainties will keep investors on edge, and, thus, will limit the government's borrowing ability, weighing on the UAH and boosting inflation.