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Government prepares to 'stop' the country: Consequences for economy and Ukrainians

Author : Natalia Lebed

Source : 112 Ukraine

The Cabinet of Ministers plans to introduce a full lockdown from December 23 to January 15. This was reported by the Segodnya newspaper with reference to a source in the Cabinet of Ministers. 112.ua reports what alternative options the authorities are considering yet.
18:15, 3 December 2020

Reuters

Everyone stops

In power circles, the probability of a complete stop of the country is estimated at 90%. We are talking about the March format, when only grocery stores were open, and the rest, including markets and public transport, was paused.

The motivation for such a step is, of course, the number of people infected with the coronavirus. At one time, 9.5 thousand new cases every day were called the condition for the introduction of a lockdown. Later the bar was raised to 15 thousand. This "height" was taken easily by Ukraine and now it moves on. True, after the last weekend, new diseases fell by a third - for the first time in recent years, the number of patients was less than 10 thousand.

From this, we can conclude that the weekend quarantine introduced by the government is still working. As you know, it was already the third Saturday-Sunday spent under quarantine restrictions: with closed shopping malls, restaurants, beauty salons and other businesses from the service sector.

Therefore, one of the scenarios may be the extension of the weekend quarantine and the rejection of the full lockdown.

Three options

And yet, the authorities are inclined to completely stop the country. Interior Minister Arsen Avakov proposed to introduce a lockdown immediately. A colleague in the government, head of the "cultural" ministry, Olexander Tkachenko, agreed with him. But the relevant minister - the head of the Ministry of Health Maxym Stepanov - announced such an event in the presence of 30 thousand patients daily.

As for the prime minister, Denys Shmygal noted that a lockdown is possible provided that the weekend quarantine does not work. The latter allegedly showed its effectiveness, but, as Minister Stepanov noted on November 30, another problem arised: although the number of patients decreased, the number of hospitalizations increased compared to how many patients are at home on self-isolation.

“The situation remains tense,” sums up Stepanov. But it's not just about the medical parameters. The fact is that the state should support private entrepreneurs who will again find themselves in difficulty due to quarantine. Their support programs have already been announced, and this week they should be finalized taking into account the specifics of individual industries.

The President promised entrepreneurs who suffer from the lockdown compensation for hired workers, a one-time financial aid for sole proprietors, as well as assistance for children for non-working entrepreneurs. It is expected that this week changes to the budget will be voted on by the Verkhovna Rada. Or they will not vote - depending on the mood of the MPs.

The second option is worse. The business will once again go out to protests. “The confidence in the authorities is falling anyway, and if these promises are not fulfilled, it will be very painful,” says Andriy Zablovsky, head of the secretariat of the Council of Entrepreneurs under the Cabinet of Ministers.

And nevertheless, if the authorities still decide on a complete lockdown (with or without business compensation), there are three options for its implementation.

The first option: total quarantine is introduced immediately after the adoption of guarantees of business support. In this case, the lockdown continues until the end of the New Year holidays.

Related: Covid-19: Italy bans domestic interregional traffic during holiday time

The second option: quarantine is introduced no earlier than December 15 and also continues until the end of the Christmas holidays. This format is better in that it gives entrepreneurs the opportunity to prepare and not spend money, for example, buying products that may not be used (when it comes to the restaurant business or something else).

The third option: the lockdown is introduced from December 29 and is valid for 2-3 weeks. It is believed that during this period - the period of the protracted Christmas and New Year holidays - the country does not work anyway, even in the "best" years. This format coincides with the information that MP Dubinsky has: the country is going into quarantine during the traditional weekend. The difference, as we can see, is only in the dates.

Human lives and economic losses

Infectious disease doctor Olga Golubovska (she is also a member of the headquarters of the Ministry of Health for the fight against Covid-19) says that she stands "for a complete lockdown, of course, because these half-measures do not lead to anything." By half measures, Golubovska means weekend quarantine.

The New Year's holidays with the gifts and a generous feast have always filled the budget, says economist Oleksiy Kushch in a conversation with 112.ua. He calls these expenditures "budget compensators" and says that the crisis, which began in November due to the lack of money in treasury accounts, risks intensifying at the beginning of the new year.

"One month of lockdown threatens us with a loss of 2% of GDP. If it happens in December, it will increase the drop in GDP from the projected 5% to about minus 6.5-7%. If the full lockdown continues in January, there will be no rapid economic recovery. Now everyone is hoping that a rapid recovery, the so-called V-shaped growth, will begin from 2021. But due to the lockdown in January, we will actually lose the entire first quarter," he says.

And, perhaps, even the second, the expert adds. "If the lockdown continues in January, the growth that the government is counting on (4.6%) will not be there by the end of 2021. At best, it may be zero or plus a few tenths of a percent. And the budget crisis will intensify.

So far, only unprotected budget expenditures have suffered in our country. And in the long term, the protected ones may also suffer. It is clear that there will be no prolonged freezing of protected articles, but some delays in the payment of pensions and social benefits are quite likely, "says Kushch.

Even worse forecasts for GDP are given by the President of the Ukrainian Analytical Center Oleksandr Okhrimenko: “Since our GDP and our life in general depend very much on trade and services, we will see a 11% fall in GDP in the IV quarter, as it was in the II quarter. If we do not know when the quarantine will end, then it could be a blow to the first quarter of next year, "he notes.

Okhrimenko also predicts a fall in retail trade by at least 20% compared to last year. And the reduction in real wages (against the background of nominal growth) to 10%.

True, business finds salvation in the transition from an offline model to an online one. But not everyone has the opportunity to sell products or services online. Moreover, such a restructuring also requires the attraction of financial resources. Finally, there are areas where online earnings are impossible or minimal, and these are cinemas, sports clubs, beauty salons, work with takeaway food, and the like.

Finally, as a result of the lockdown, the dollar rate will rise, because the American currency depreciates when it is sold. And people sell it when there is a demand for goods and, in particular, imported ones. Trapped in four walls, Ukrainians will not be able to buy as much as they used to buy (and, after all, sell too). The hryvnia rate will definitely decrease, experts say.

In the days when the parliament will approve estimates for the maintenance of itself, the Cabinet of Ministers, the Office of the President and the like, such advice is really relevant. However, hardly anyone will refuse from "extra officials". And therefore, there is no way to save money on this.

The government will demand new solutions to pay compensation and save the economy. It will either find them, or will refuse the lockdown. One thing is certain: we will know about the final decision this week.

Related: Strict quarantine in Turkey not to extend on foreign tourists

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