Ukraine: Opposition Delays New Government's Appointment but May Help Ease Its Internal Divisions; Inflation and Uah Stable Despite Sharply Wider Trade Deficit

Summary

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Appointment of the new prime minister and cabinet has been held up by opposition protests, but these may help ensure longer-term political stability by preventing a divisive choice of parliamentary speaker. While unlikely to split the three-way 'Orange' party alliance, the Regions Party - numerically the biggest - has shown its ability to block policies and appointments it regards as too extreme. The Q2 pick-up in growth was accompanied by a deterioration in the trade balance, but inward investment flows have helped keep the UAH exchange rate stable and foreign reserves on an upward path. Freezing of gas import prices to the end of Q3 gives the government more time to settle in and form a negotiating strategy, and the recent price threat to Russia from Turkmenistan could be worked to Ukraine's advantage. But the sharply lower growth rate and loss of past years' export surplus illustrate the serious impact of higher oil and gas prices on an energy-intensive economy, with risk of renewed winter shortages and production downturn if deficiencies in summer stockpiles are not quickly resolved.

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Ukraine: Opposition Delays New Government's Appointment but May Help Ease Its Internal Divisions; Inflation and Uah Stable Despite Sharply Wider Trade Deficit

Opposition blocks attempt to link votes on new premier and pro-presidential speaker

The appointment of prime minister-designate Yulia Tymoshenko and her coalition of centre-right reform parties has been further delayed by an opposition parliamentary blockade. The Regions Party, which finished top of the 26 March poll but is outnumbered in the new parliament by an alliance of the Tymoshenko bloc, Our Ukraine and the Socialists, has refused to cooperate with a vote that wo...

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