2007

GROWTH WITHOUT REFORMS

Exceptionally high growth rates in Ukrainian economy have started slowing down. Problems concerns concentration of added value in just several economy sectors and relative low level of added value in general. Effectiveness of many successful companies is leveled by high tax pressure. Long-term support of growth continuation looks problematic with limitation of investments. Still most of investing is provided by re-investments of companies. Shares of banks, investment funds and population directed to capital investing are still low. FDI grow, but they faces large capital outflow. Population incomes did not become solid pillar of investments, vice versa people started spending more than earning and saving – they rather contribute in growing Ukraine’s indebtedness. High costs of investing lead to more misbalance in economy. Higher rates of investment growth are seen just in some leading industries, and that increases gaps between different industries’ role in economy. Besides limitation of investment capacities causes higher concentration by M&A deals and alliances. All this bring very high crisis risks in a case of decline world prices for Ukrainian exports and partly after higher fuel price level. In order to overcome such risks Ukraine needs in-depth reforming. However, the apparent period of political stability of 2008 – early 2009 will hardly be used and reformist efforts will remain incomplete and not systematic and therefore not effective.