BMI View: There are promising signs of macroeconomic recovery in the Ukrainian economy. However,geopolitical tensions, poor business sentiment and a lack of quality supply continue to dampen demand forcommercial assets. Rents are declining in the office sub-sector due to the unfavourable market conditions,although rates in the industrial and retail sub-sectors are keeping steady as tenant demand improves.
Rebounding industrial production, increasing household purchasing power and on-going cooperation withthe International Monetary Fund (IMF) have helped the Ukrainian economy stabilise in 2017. Short-termsovereign risks have been contained, influencing revisions to our headline growth forecast for 2017, withreal GDP now forecast to grow 2.3% rather. The improving situation in Ukraine is indicative of theresilience of the economy to the negative impact of persistent separatist activity on the eastern border,which has led to a blockade on trade and transport into the Donbass region. Moreover, minimal ForeignDirect Investment (FDI) inflows have constrained overall investment activity.