From Capital Economics:
The introduction of capital controls in Cyprus risks disrupting these flows, which may ultimately affect business activity and hit vital capital inflows. In marked contrast to Russia, Ukraine’s economy is already on the brink of a balance of payments crisis. The current account deficit is currently at a record high of 8% of GDP, and on top of this Ukraine is facing an onerous external debt repayment schedule, with a total of over $55bn due to be repaid this year. We estimate that Ukraine’s total external financing requirement over the next 12 months stands at close to 40% of GDP. At the same time, Ukraine’s FX reserves have dropped below three months of import cover, which is the minimum recommended reserve coverage by the IMF. To make matters worse, the economy slipped back into recession towards the end of last year. And despite all this, there has been little progress in negotiations with the IMF over a new financing package.
Summing up, Capital Economics said:
The upshot of all this is that although the direct impact from the levy on deposits in Cyprus on the Ukrainian economy is likely to be limited, wider vulnerabilities mean that the Cypriot crisis may still be enough to tip Ukraine into a financial crisis of its own. Without an IMF deal in place, Ukraine is extremely exposed if the Cypriot bailout triggers a fresh spike in financial market tensions.
On the ground in Kiev, the Cyprus crisis ripples are not sparking panic just yet, but they are being felt.