Comment of the Ministry of Economic Development and Trade on the revaluation of direct foreign investment

The National Bank re-calculated the foreign direct investment inventory (considering at the price of last transaction) for the period of 2010-2016, with the aim of forthcoming the valuation of inventories to market realities, which agrees the recommendations of the IMF. In developed countries, such revaluation is conducted made on an ongoing basis. In Ukraine it was conducted for the first time. It should be noted that the listed data for the period 2010-2013 take into account the Crimea and Sevastopol, and data for 2014-2016 years are calculated without considering the Crimea and Sevastopol, as well as parts of ATO zone.

Since the statistical data of State Statistics Service on direct investment are the informational basis for the calculation by the National Bank of data on flows and reserves of foreign direct investment in the frames of balance of payments statistics and international investment position, the State Statistics Service has simultaneously reviewed the methodology of compiling and calculating the statistics on direct investments.

In order to ensure coherence of the above-mentioned interrelated indicators of the National Bank and State Statistics Service, the statistics on direct investments, which was extended at par value based on the information of enterprises (organizations, institutions) within the framework of the state statistical observation “Foreign investment”, was overviewed considering administrative data of the National Bank on the market value of direct investments (shares, property, etc.) of enterprises and institutions.

The survey was based on the statistics for the beginning and the end of the year for the period from 2010 to 2016, both in Ukraine as a whole, and in the regional section with a detailed breakdown by country and type of economic activity.

The results of conducted calculation showed that the market value of direct investments has decreased. The accumulated structural problems and imbalances caused by the inconsistency and incompleteness of reforming the Ukrainian economy, which since 2014 were reinforced by the negative impact of the annexation by the Russian Federation of the Autonomous Republic of Crimea and the city of Sevastopol, as well as the military conflict in the east, have become the reason for the decline in market value. The consequence was the loss of inter-sectoral and logistic ties in the regional and foreign economic area, the destruction of production capacities and transport infrastructure in the territory of the military conflict, a significant increase in investment risks, a significant devaluation of national currency against the US dollar and the spread of price shocks.

That is, the given reduction of direct investment inventory volume has been accumulated in 2010-2016 as a result of not having to adjust the value of investment inventory depending on factors in which their market value was formed.