2009

Economy Respite before New Problems

Despite some signs of revival of the world economy recession in Ukraine remains still deep. Fall of Ukraine’s GDP is 20% up to 22%, while during the crisis months of Oct. 2008 – March 2009 total economy fall was approximately 35% - 37%, or even higher. Fall on industrial production was 32% for Jan.-Apr. 2009 and also up to 32% for April.
Problems in industries caused by export, because of lower world market demand, were enhanced with low domestic demand. So despite some revival of the world markets, the total negative industrial trend has not overcome yet. Even if the situation on the world market improves that will not automatically mean improvement for Ukraine.
As a result of freezing global investment activity, total increase of net foreign direct investment (FDI) to Ukraine in QI 2009 was merely $0,82bn, less than a quarter of similar inflow in QI 2008. In total, Ukraine in QI 2009 got 39,5% decline of investments in fixed capital.
Deficit of the Ukrainian balance of payments was $6,3 bn for Jan.-Apr. 2009 Main reason for current deficit was not problems with foreign trade. Actually, main reason is the deficit of the financial account, $5,7 bn. Bank are amid key debtors, but to decide all bank problems Ukraine needs at least 5% of its GDP. So most probably a number of banks which are de facto bankrupts may increase twofold.
The government sees its main task however as the state budget fulfillment.In order to collect as many taxes as it can, the government increased excise rates, pressed companies to pay taxes in advance and to show profits. The other ways to cover deficit include delays with VAT reimbursement, usage of the IMF loans, selling state bonds to the National Bank.
The government however will see some additional gaps with fulfillment the Pension Fund, the Stabilization Fund and the Privatization Fund.
As a result, i mproper governmental budget policy will make all the economy unsteady, so the economy will become much more misbalanced – starting from the second half of 2009.