Economy avenges mistakes and miscalculations of Ukrainian politicians

Author : Olexandr Honcharov

Source : 112 Ukraine

It is important for our markets and the real sector of the economy to attract investments and hedge risks, and without the adoption of the draft law "On Capital Markets" large investors will not come to us
23:14, 4 September 2019

Let’s start with some comparative statistics. In 1990, Ukraine’s GDP amounted to 293,235 billion US dollars, and in the past 2018, it barely reached 130,83 billion US dollars. That is, all these 28 years of independence, we have been constantly falling. But over the same period, South Korea’s GDP grew by 500%, multinational Myanmar’s GDP - by 1727%, socialist Vietnam’s GDP - by 1005%, and today's world leader in the economic growth communist China shows increase by 2162%!

Well, the cherry on the cake: the shipbuilding products of South Korea has a world share of 45% today! And their main shipyard Hyundai only by now has reached almost the same capacities that many years ago in Ukraine the Mykolaiv shipyard Okean had. Design bureaus and research institutes in the same Mykolaiv could develop and put into production, and the shipyards of this southern Ukrainian city could master the construction of all types of commercial ships, warships, river, fish and fish processing vessels, as well as service vessels (port fleet), scientific-industrial and educational ones.

This is alarming for the future economy of Ukraine. And it’s sad, because our politicians have made too many mistakes and miscalculations, they don’t understand that the economy is taking revenge for this. And today it should already be clear to everyone that the main thing is to attract investment in Ukraine. However, it turns out that there are some more important tasks for the authorities. But it is important for our markets and the real sector of the economy to attract investments and hedge risks, and without the adoption of the draft law "On Capital Markets" large investors will not come to us. Especially at this stage, when the situation in Ukraine is still unstable.

Moreover, it is unstable not only in our country, but also in all world markets. It is necessary to prepare for a new financial crisis, because even Japan has already begun to warn of global investment losses. The chief investment director of the world's largest Pension Fund in Japan, Hiromichi Mizuno, said: “When we lose money in equity, we make a profit in the form of fixed income, but we lost in each asset class, including currency translation. That had never happened ... Many Japanese bonds have negative profitability, while the country's shares fall from the maximum of January 2018. "

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Yes, and the same fear of recession in the United States only intensifies after a new aggravation of the trade war between America and China. US President Donald Trump was angry last week. First, China announced additional duties on US imports worth $ 75 billion a year. Secondly, the head of the US Federal Reserve Jerome Powell did not promise anything concrete in terms of aggressive interest rate cuts, which greatly disappointed Trump, and on his Twitter page he attacked China and Powell. Finally, on August 23, the US stock index S & P500 collapsed immediately by 2%.

But even this is not enough to understand the situation on world financial markets and specifically in Ukraine. Especially the situation with our debt is very alarming, since the US Federal Reserve may bring a debt crisis to our homeland. Since 2008, we all remember well how the Ukrainian market can react sharply negatively to events in America. I would venture to suggest that President Donald Trump, having sharply criticized the US Federal Reserve, will still be able to urge its chairman Jerome Powell to lower the key interest rate. In addition, Trump substantiated his claims by writing the following on his Twitter page: "Germany sells 30-year bonds with negative yield. Germany competes with the United States." And then, according to the US president, the Fed "does not allow us to do what we have to do. They put us at a disadvantage in comparison with our competitors. Strong dollar, no inflation! They act like a swamp."

As for me, after such a split, I don’t exclude sharp movements of the head of the Fed, since Donald Trump has a new presidential race ahead and he needs strong American markets with steady growth in the US economy. So, we are waiting for the next performance of Powell and the expected reduction in rates. But it’s important to understand that the main problem for the Ukrainian debt market (the future fate of the government bonds) is how much Jerome Powell will decide to cut the rate in order to please its president. The fact that this will happen is understood by many investors.

To be honest, for the interests of Russia first of all, and for a number of other countries recently, the main goal of the Ukrainian project has been to bring our economy to a standstill, to create a fully dependent and controlled banana republic. However, in spite of all aggressive outside actions and doubts within the state, Ukraine on August 23 of 2019 still managed for the first time since independence to successfully test the engine of the middle-class space launch vehicle Cyclone-4, designed by Yuzhne Design Bureau and manufactured on Yuzhmash. During the tests, all systems worked perfectly, the stage engine was turned on five times, as planned. So, maybe we can prove that we are a missile power, and not a banana republic?!

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