2007

AT THE TOP OF ECONOMIC DYNAMICS

The fuel (gas, oil) price shock was successfully overcome; ↑ GDP growth (7,9%) and industrial production growth (up to 12%) got stable; ↑ Investment growth is high; FDI also grow; the investment share in GDP increased; ↑ The consumer market is characterised with growth of population incomes; ↑ Profitability grows, often due to legalisation, while share of the shadow sector declines. At the same time, there are many negative trends: ↓ Inflation, both consumer and producer prices, increases; ↓ Growth of unemployment; ↓ Growth rates for GDP and industrial production have been slowing down from mid 2007; ↓ Imports grow, often because of growth of consumers’ consumption and FDI demand for equipment, besides there are no perspectives of import substitution because of low quality of Ukraine’s technological production, now sold mostly to ex-USSR. In general, it is possible to state, that now Ukraine’s economy passes its dynamics peak – with current economic, social and political conditions. That makes two conclusions. First, there will hardly be growth rates higher than now for the most of industries. Second, the economy has fully adapted to new conditions. Therefore neither changes in governmental policies, nor further gas price increase, nor any other factors will be critical so much. However, there is still huge dependence on external conjuncture remains, but it will not play a crucial role in 2008. Meantime internal demand can strongly grow during the next year, so it will be able to compensate apparent falls of the world prices for Ukrainian exports in future. So, it is possible to state that for the Ukrainian economy year 2004 was the year of uncertainty, 2005 – the year of some crises, 2006 – the year of levelling, 2007 becomes the year of growth, while 2008 will most probably become the year of stabilisation, but without any significant breakthrough. Actually, the process of setting the economic system on the new equilibrium level goes on now.