Event

Volodymyr Zelensky – a popular comedian – won a landslide victory in the second round of the presidential elections, defeating the incumbent president Petro Poroshenko. Tackling corruption was his key campaign theme. Mr Zelensky is expected to be sworn in as president next month.

Impact

Mr Zelensky’s political agenda as a whole is not very detailed.The comedian remains vague on his policy objectives in order to exploit the image of the honest man he plays on TV. He has no prior political experience. On the positive side, two former ministers are his advisers and Ukraine is likely to continue to benefit from the support of the EU.

The next Parliament elections are scheduled in October. Therefore, Mr Zelensky’s upcoming announcements will aim not to disappoint voters in the coming months in order to secure enough seats for his party. In the highly divided political landscape and amid high expectations of tackling corruption and increasing living standards, this is likely to be challenging, as the newly elected candidate has currently no lawmaker representing his party in the Parliament and little support from the other parties. After the parliamentary elections, the formation of a government is likely to be a tough task for the inexperienced politician but key to determine Ukraine’s forthcoming policy.

What is more, one of Mr Zelensky’s first policy move was to call for a decrease in gas prices. This could derail the IMF programme (approved in December last year) which is key to maintain macroeconomic stability. Indeed, as prior action required by the IMF, the government had adopted a resolution aimed at increasing the gas price in November 2018 and on 1 May 2019. It should be noted that Ukraine’s past performance under the IMF programme was poor. In this context, risk of policy slippages has clearly increased with the election of Mr Zelensky.

Other questions are related to his link with the oligarch Igor Komoloisky who is a former owner of PrivatBank – a large financial institution – which was nationalised in 2016. The oligarch is likely to push for a reversal of this nationalisation. The rehabilitation and strengthening of the banking sector (including the intervention in PrivatBank) is a major recent achievement of the previous authorities as the banking system remains fragile but is in better shape than in 2014.

The unresolved conflict in the Donbass and strained relations with Russia remain another challenge for the new president. Russia’s recent decision to simplify procedures for residents in the separatist-controlled Donetsk and Luhansk regions to obtain a Russian passport, a move condemned by Ukraine and other EU countries, was likely to aim to test the new president. And, on the other side, Ukraine’s Parliament approved a law granting special status to the Ukrainian language. President Poroshenko is likely to sign it into law before he leaves office as it is opposed by Mr Zelensky and by Russia as it discriminates against Russian speakers.  

To sum up, it is too early to judge the policy of the newly elected president given that he has no detailed agenda. That said, his first step to call for a decrease in gas prices is worrying as it can augur further policy slippages. Now, it remains to be seen what will be the results of the forthcoming parliamentary elections in order to assess in which policy direction Ukraine wants to go and what will be their impact on this still fragile economy currently classified in category 7/7 for the MLT political risk, which represents the solvency of a country.

Analyst: Pascaline della Faille - P.dellaFaille@credendo.com