IBI-Rating has upgraded the rating of investment attractiveness of Odessa city

National rating agency IBI-Rating informs on upgrading of the investment attractiveness rating of Odessa city at invAA- grade. The credit rating of the city has affirmed at uaA grade, keeping the «stable» outlook.

Such rating grades represent the excellent investment attractiveness and strong ability of the city to pay off its financial commitments. The «stable» outlook, with the highest probability, implies immutability of the rating on the horizon for 12 months.

Mr. Dmytro Zadesenets, Director of the municipal department of the IBI-Rating agency, has accented: «The upgrading of the investment attractiveness rating grade is due to the long-term growth of some indicators of the city’s socio-economic development, dynamic action by the local authorities to improve the investment climate and the introduction of a «maximum friendly» policy for business, as well as the modernization of infrastructure and transport».

Were taken into account:

1. The structure of the economic complex of the city and the dynamics of key indicators

The economy of Odessa is diversified, what reduces the impact of adverse commercial changes in certain industries on its development and ensures stable revenues to the city budget. In 2018, a further increase in the main indicators of socio-economic development was observed: the amount of industrial products sold grew by 9.1% to UAH 28.2 billion, the amount of construction work performed - by 50% to UAH 12.1 billion, retail turnover - by 6.4% to UAH 36.7 billion, foreign trade turnover - by 9.9% to USD 2.1 billion. Most per capita indicators continue to respond or exceed the national average.

2. Competitive advantages and disadvantages in comparison with other cities of the country

The city has a developed logistic complex, a significant number of educational institutions (according to different profiles), developed service, communal and social infrastructure. A significant number of operating enterprises, the status of one of the largest tourist centers in the country and more than 1 million people of the population provides high domestic demand for goods and services, and also creates a good basis for the further development of the manufacturing sector and the transport industry. At the same time, the cost of labor resources is lower compared to other «million-plus cities». Active actions aimed to attract local and foreign investments, as well as a policy of maximum transparency in relation to business by local authorities, has a positive effect on the investment climate in the region, as well as on the economic, human and social potential of the city. Key government authorities of the region are localized in Odessa.

3. Efficiency of financial policy and budget indicators

According to the results of 2018, city budget revenues increased by 15.2% to UAH 10.7 billion, which was due to an increase in revenues from own sources by 17.3% to UAH 7.2 billion, transfers from higher level budgets - by 11.2% to UAH 3.5 billion. The share of tax revenues in the structure of the city budget was 56.8%; such revenues are diversified by payers and industries, which ensures relative stability and predictability of budget revenues. The level of fiscal security continues to exceed the national average and in 2018 amounted to UAH 7.1 thousand. The city budget remains a donor budget, transferring a reverse subsidy to the state budget - UAH 232.3 million in 2018, against UAH 156.6 million in 2017. Due to the increase in current expenditures, the cost of servicing loans while maintaining a high level of financing for capital expenditures, the city budget, like a year later, was made with a deficit in amount of UAH 595 million, which was covered by balance of funds and borrowed capital.

4. The sensitivity of the budget and the city economy to the impact of negative factors

The active actions of the city authorities in problem of modernize infrastructure, transport, housing and public utilities require additional funding, which also comes at the expense of attracting paid resources, which leads to an increase in the debt burden on the city budget. As of January 1, 2019, the consolidated debt burden was 32.4%, which corresponds to a moderate level of debt burden. In the future, it is expected to fluctuate within 40-42%. Given the long-term nature of most loans and a convenient interest payment schedule, their servicing will not exert significant pressure on the budget revenues, at least with the existing income levels. According to the Agency, the impact of negative factors on the economy and the financial viability of the city remains moderate - the city’s economic complex is well diversified and sufficiently adapted to the risks posed by the military conflict in eastern Ukraine and the introduction of trade restrictions between Ukraine and the Russian Federation.

Mrs. Svetlana Bedrega, Deputy Mayor, Director of financial department of Odessa City Council, has commented the results of rating actions: «The city authorities are making maximum efforts to build a favorable investment climate and create in Odessa a business and tourist center of international level. Odessa is attractive for investments and it is interesting for domestic and foreign companies».

In order to conduct the analytical research the materials obtained from Odessa city have been used, including: indicators of the social and economic development, statistical data, treasury statements, program materials, other necessary internal information, as well as the information from the public sources, which the Rating agency considers credible.

Municipal department
For more information please contact:
Press service of IBI-Rating
(044) 362-90-84