Blind spot of Ukraine's Cabinet: Numbers contradict the reality

Author : Olexandr Honcharov

How many billions will Ukraine’s economy lose in 2020, and will PM Goncharuk’s Cabinet of Ministers be strong enough to stop the threat of the global financial crisis?
17:02, 18 October 2019

How many billions will Ukraine’s economy lose in 2020, and will PM Goncharuk’s Cabinet of Ministers be strong enough to stop the threat of the global financial crisis? According to leading Western analysts, the world economy is in turmoil, it has entered a period of "synchronized recession." According to the TIGER (Tracking Indices for the Global Economic Recovery) index, key economic indicators have fallen sharply to their lowest levels since spring 2016.

In turn, the managing director of the International Monetary Fund, Kristalina Georgieva, said: "If we take into account indirect losses from the trade war, then in 2020 the world economy may miss 700 billion dollars - 0.9% of world GDP."

It turns out that the statement of PM Goncharuk about the annual 7% GDP growth is the end? Indeed, analysts of the International Monetary Fund in their October issue of “Prospects for the Development of the World Economy” note that the world economy is slowing down amid escalation of geopolitical tensions and the emergence of new barriers to international trade, including as a result of the confrontation between the United States and China.

Related: PM Honcharuk discusses economy of Ukraine with G7 ambassadors

In 2019, the world economy will grow by only 3% (0.2 pp below the July forecast and 0.3 pp below the April forecast), which will be the lowest indicator since the 2008-2009 crisis. In turn, according to the forecast of the Ministry of Economic Development of Ukraine, in 2020 Ukraine’s GDP growth is projected at 3.3%, in 2021 - by 3.8%, in 2022 - by 4.1%.

October 15, the Ministry of Finance again placed government bonds for a total of 45 million USD with a repayment date of January 15 and September 30, 2020, and September 29, 2021. I also recall that in January-September of 2019, the Ministry of Finance with the help of government bonds already raised 194.8 billion UAH (7,7 billion USD), 3.8 billion USD and 189 million EUR!

Related: Ukraine’s Economy Ministry excludes possibility of land purchase by Russians

Who and why will pay these huge and very expensive debts. In addition, the real picture is even worse. Judge for yourself, for example, September 24, hryvnia bonds of the domestic state loan were placed as much as 0, billion USD at more than 15% per annum!

At the same time, bonds with negative interest yield are already being placed in EU countries. Or doesn’t Ministry of Finance know this? Or hope to soon receive money from privatization, sale of land and pay off creditors and borrowers?

Investments should become the driver of the changes. Here, for example, the ratio of the share of investments in the country's GDP is 17% -18%. And in other countries with GDP growth rates above 5%, the ratio of the share of investments in GDP reaches 25% -30%, that is, the investment growth rate must be maintained at 20% per year. And for that, structural reforms are needed.

Related: New discount rate of National Bank will not contribute to economic growth

October 15, Deputy Prime Minister for European and Euro-Atlantic Integration Kuleba announced that the next step after the introduction of a visa-free regime between Ukraine and the European Union will be integrated border management with the EU, which opens up additional opportunities for movement, and further clarified: “I can’t say that this is "visa-free 2", but this is the next step that we must take in order to fulfill one of the tasks set by the government - to ensure freedom of movement."

This puts an end to economic growth in Ukraine due to the huge shortage of skilled labor. Yes, our employees will feel fatter and warmer in Europe, but who will save the country's economy in Ukraine? Most likely, Kuleba does not care about this question.

Related: Economic Freedom rating: Ukraine takes 135th place

Did someone have the libertarians would act in a different way? Although in the spring of this year, the largest audit company in the world, KPMG, having conducted a survey among Ukrainian top managers, said that the main danger for Ukrainian companies, according to their top managers, was the lack of qualified workforce. By the way, with 24 million working Ukrainians, 2-3 million, according to the IMF, are constantly working abroad.

Experts clarify that in fact the number of Ukrainians who left their homeland to earn money in stable economies is much larger.


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