“It is vitally important that we keep an open mind to the signs of improvement”

By Yulia Sobko, Financial Communications & Investor Relations Manager, The PBN Company, Kyiv

The global crisis is in large part a ‘crisis of confidence’. Many economists agree that fears and negative sentiments are playing a role in making the crisis worse. Conversely, when expectations improve, the markets should also pick up quickly.

On an anecdotal level in Kyiv, the first signs of economic recovery may have appeared. The city’s restaurants were virtually empty for most of the winter. With the welcome return of sunshine, they are now full with local and visiting customers again.

More significantly, plummeting consumer confidence has stopped its tailspin. From September 2008, the Consumer Confidence Index (CCI) fell by more than a half, from 96% in August to 41.8% in January, according to ICPS, a local policy think tank. At the end of winter consumer confidence showed a slight improvement rising by 0.5% to 42.3%, which is linked to a degree of economic stabilization, especially on the currency and labor markets.

While two international agencies downgraded Ukraine’s sovereign rating in February, the government has since made a strong attempt to stabilize the economy and support the IMF deal. The last law demanded by the IMF package is now being submitting for a vote to Verhovna Rada (the Parliament), which is intended to complete the go-ahead package needed to get the $16.5 billion IMF stabilization loan this year.

In a bleak situation, some leading industrial groups that are demonstrating robustness. In January, Ukraine’s industrial production sank by 34.1% year-on-year. As our most important export industries steel and mining continued to decline, one ore mining company in particular, Ferrexpo plc, with assets in Poltava Region, was a surprise to everyone.

Ferrexpo’s 2008 results, announced last week, showed a 60% increase in revenue and a 71.6% increase in net profit in 2008. This is a record not only for Ukraine (our production of metals and mining posted a 46% year-on-year decline), but also for Central and Eastern Europe. It also demonstrates that good management, together with the efficiency improvements the company has been working on for the past two years as well as strong marketing ties with the rest of the world (especially China) can make a life-saving difference.

While no one should underestimate the severity of the crisis, it is vitally important that we keep an open mind to the signs of improvement – for just as negative sentiment has contributed to the crisis, realistic optimism about the future will be vital in building the recovery.

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