2005
THE ICEBERG OF ECONOMIC TROUBLES
Main discussion topics in Ukraine's economy are inflation leap, hryvnia exchange rate revaluation and gasoline deficit. However that is only top of the iceberg of economic problems that Ukraine faces now. Inflation was caused by large social payments and is seen in many groups of goods, not only meat and gasoline, as government suggested. It is almost total. Government efforts to stimulate imports are ineffective because import prices were already market based. The same ineffectiveness concerns state efforts to regulate gasoline prices. Moreover, government did not managed to liquidate roots of it, so the next fuel deficit may happen in future. The way to postpone monetary inflation, using revaluation of hryvnia was by many outcomes effective enough. However it is one-time and short-term approach. Further higher inflation is inevitable. More serious problems, the base of the iceberg, concern:
- slowing down economy growth rates or even decline for some key branches, like metallurgy, transport, construction, what will slow down economy growth in near future;
- fall of investments for more than a quarter investment activities (including construction, agriculture, different transport, R&D), what will cause slowing down in medium and long term;
- decrease of exports to either important destinations (the European Union, China, the USA) and types of production, mostly technological (machinery, transport), what will negatively influence domestic demand (and hence production) and also investments.
