A growth rate represents a feeble bounce back from the 17% cumulative economic collapse in 2014-2015. It is slower than both the EU and global growth rate, and a lot lower than required to put the nation back on the road to recovery. This is according to the Financial Times, UNIAN reports.
Anders Aslund, an economist at the Atlantic Council, warns that Ukraine risks slipping behind Moldova to become the poorest country in Europe in per capita terms, according to the Financial Times. After 4.8% year-on-year rise in the last quarter of 2016, the disappointing growth rate exhibited in 2017 was partially caused by a trade blockade on the regions controlled by separatists in March of last year, which contributed to a 0.1% decline in industrial output.
However, the low investment is a primary underlying reason, according to the Financial Times. The military conflict in the eastern part of the country is another reason. Various issues with the country’s banking system and concerns over the implementation of reforms and efforts to strengthen the rule of law.
The National Bank of Ukraine has carried out a vigorous banking reform that reduced the number of operating banks from 180 in 2014 to 86 now. But the restructured banks, some of which still have very high rates of non-performing loans, are hesitant to issue new loans, and even then only at double-digit interest rates.
With the national currency, the hryvnia, recently weakening again following its deep fall in 2014, banks are additionally cautious toward clients who import machinery and raw materials. Also, the justice system needs to be reformed in order to allow disputes to be settled fairly. Furthermore, high-level corruption needs to be curbed too.