Transcript Слайд 1 - Центр Разумкова

Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
Ukraine, the European Union and International
Community: Current Challenges and
the Agenda for Overcoming the Stalemate
Scenarios for economic
and political developments
in the medium and long-run
Vasyl Yurchyshyn,
Razumkov Centre, Kyiv, Ukraine
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
1
Ukraine: 2000 – September 2008
average annual economic growth 7.5%.
The decline in real GDP in 2009 – by 15.1%:
industrial production – by 22.0%,
construction – by 45.9%,
transport – by 48.0%;
drop in fixed investments – by 46.2%
How may the losses of the recession be
measured?
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
2
GDP per capita in Ukraine
2005
2007
2009 (e)
$
$ PPP
$
$ PPP
$
$ PPP
1761
6848
3035
6914
2500
6400
In $: 2009 – level of 2006, reflecting 110th place in world (IMF)
Average wage (monthly)
(end of the period)
2007
2008
2009
UAH
1475
1917
1950
$
292
333
244
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
3
Risky performance of Ukrainian economy
Internal
The consumer-oriented domestic demand with low income
of households:
- Final consumption – 84.6% of GDP
private consumption – 65.4%,
public consumption – 19.2%,
- Investments – 17.1% of GDP
High energy-dependence (imports) with low processing
degree or semi-finished goods
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Risky performance of Ukrainian economy (cont.)
External
High openness of the economy: in 2009 exports amounted to
46.3% and imports to 48.0% of GDP;
Lack of diversification - over 50% of total exports are
comprised by only a few products of low added value, such
as metals, chemicals, grains.
Narrow geographic diversification. The key trading partners
(Russia, Turkey, Italy, Poland, Belarus, Germany) take a half
of total exports;
High volatility of demand for Ukrainian exports - revenues
remain unstable and unpredictable.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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External resources (CAB+FDI)
and economic growth
15
Economic growth,
%
10
5
2008
2002
2005
-3000
-1000
0
1998
1000
3000
5000
7000
9000
11000
CAB+FDI, $ m
-5
-10
2009
-15
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Deterioration of public finances
in 2009 – UAH 70 bn (7.5% GDP); if including bank
recapitalization, Pension Fund, etc. overall – 11.5% GDP
Ukraine’s External Debt
($ bn, beginning of the period)
2008
2009
2010
Total
80.0
101.7
104.0
(85% GDP)
Government
11.9
12.0
17.8
NBU (Central Bank)
0.5
4.7
6.2
Banking system
30.9
39.5
30.8
Corporate
33.6
41.3
44.1
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Decline in deposits and credits to households –
in 2009 to 48.8% of total bank credits –
real shocks for business and households
after several years of rapid growth of crediting
300000
260000
220000
180000
Credits
140000
Deposits
14.04.10
19.01.10
26.10.09
02.08.09
09.05.09
13.02.09
20.11.08
27.08.08
03.06.08
10.03.08
16.12.07
22.09.07
29.06.07
100000
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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In 2001-2008 actually fixed exchange rate UAH/USD.
Crisis in the autumn of 2008 – exchange rate adjustments
with huge losses of the Reserves
8,5
3000
8
2000
7,5
1000
7
0
6,5
-1000
6
-2000
5,5
-3000
5
Net NBU intervention (+ purchase), $ m
UAH / $1
04'10
03'10
02'10
01'10
12'09
11'09
10'09
09'09
08'09
07'09
06'09
05'09
04'09
03'09
02'09
01'09
12'08
11'08
10'08
09'08
08'08
07'08
06'08
05'08
04'08
-5000
03'08
4
02'08
-4000
01'08
4,5
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Recent development (and prospects for the future?) –
consolidation of political power with the leadership
of the President
Political consolidation. After the presidential elections :
- formation of new Parliament coalition, lead by the Party
of Regions (PR),
- new Government - primarily from the representatives of
PR,
- rotation on the regional level – new consolidated policy
on the regional level,
- elimination of permanent (for last 5 years) conflicts
between President and the Government,
- implementation of the President and the Government
initiatives under the support of the “friendly” coalition.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Economic improvement in 2010:
- Industrial output grew by 12.6% (January-May),
including double-digit growth in the main industries:
metallurgy (+22.2% yoy),
oil-chemical industry (+23.8%),
machinery building (+28.0%).
Low comparative base of the previous year !
-
Further reduction of inflationary pressure (with 0.3% and
0.6% deflation in last two months).
- BoP – improvement: last months – CAB-surplus,
international Reserves growth by $2,5bn in after election
period.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
11
Economic improvement in 2010. (cont.)
In short-run (2010) possible to expect:
- further improvement of the CAB,
reflecting price reduction for imported gas,
- lower inflation (less than 10% yoy),
if gas tariffs for households are postponed,
- discount for imported gas supports price competitiveness of
basic exporting industries,
- further price stabilization due to UAH slight appreciation,
declining pressure from the current account.
Measures to support the economy inevitably mean substantial
growth of the state role in business. As a result –
politicisation, deinstitulisation, monopolisation of
the economy
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Institutional Outlook
The quality of the business environment in Ukraine remains
unsatisfactory
- the country is ranked 145th out of 183 countries in terms
of Ease of Doing Business,
- domestic and foreign businesses still face an onerous
burden of excessive and costly regulatory, licensing and
taxation procedures,
- weak business climate holds back private sector, which
restrains the growth of investments, employment, output and welfare.
Past sources (exports, “cheap” credits, domestic consumption) are
unlikely to be the main drivers for Ukraine’s GDP
growth in future.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Are current trends stable and irreversible?
External risks –
possible dissemination of the “second wave” of the
European economic and financial crisis,
followed by its negative impact on Ukrainian exports
and capital inflows into Ukraine.
Internal risks –
deterioration of the financial stability of the
banking system and increasing fiscal problems
as a result of the suspension of economic recovery.
Ukrainian government has no experiences and incentives
for the consistent introduction of systemic
transformations.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Prerequisites for Ukraine’s development
The Committee for Economic Reforms has been established
under the President to create and deliver an Economic
Reform Program for 2010-2014. The main priorities of the
Program:
- setting a framework for ensuring long term
macroeconomic stability;
- keeping low inflation;
- stabilizing public finances;
- developing a more sustainable financial sector.
Resumption of co-operation with the IMF is still seen
as a dominant. No bilateral loan would be able to match
the $12-18 bn IMF financing that may become available
under a new program
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Prerequisites for Ukraine’s development (cont.)
At the same time, successful implementation of the Program
means fruitful cooperation with IMF and other IFIs.
Restoring cooperation with the IMF means also improving
collaboration with the World Bank and EU, which gives
investors a positive signal on the reduction of
macroeconomic risks.
And vice versa
Postponement of the reforms (particular, due to local
elections in late October 2010) will push Ukraine into
slow and poor economic activities, at least in mid-term.
Failure in adoption of the Program for cooperation between
Ukraine and the IMF means increasing economic
imbalances, capital outflow, social losses.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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In the absence of a new Ukraine’s program of
cooperation with the IMF (internal consequences):
- Failures in full balancing public finances;
- Automatic blocking or high cost of alternative external
financing (including adopted €500m from EU);
- Impossibility to reduce tax rates, that is required by the
economy for its acceleration;
- Continuation of the policy of active domestic debts. This will
lead to growing of the pyramid of domestic T-bills;
- Strengthening of the «investment famine» and decreasing
the conditions for sustainable macroeconomic growth,
- Significant decrease/collapse of confidence to the national
currency, high devaluation expectations as the result of
predicted net capital outflows.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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In the absence of a new Ukraine’s program …
(external consequences):
The information on terminating the cooperation with Ukraine
by the IMF can create a negative informational
intervention.
That forms negative secondary effects:
- Phasing out funding of by other international financial
institutions (e.g. World Bank, EBRD);
- Reducing the sovereign ratings of Ukraine and the rising
cost of foreign borrowing;
- Complications in restructuring sovereign and corporate
debts.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Scenarios for economic development of Ukraine
Optimistic: is associated with the establishment and consistent
implementation of transformations that should radically improve
the economic and investment environment of Ukraine and bring it
into the path of sustainable long-term development.
Realistic : is characterised by slow and cautious improvements,
which are not too risky for the government, that mainly support
the current structure of the economy, but do not provide
significant incentives for improving productivity and incomes of the
population.
Pessimistic: Ukraine faces a combination of the deep global
slowdown (due to expanding crisis in euro-zone) and imbalanced
domestic macroeconomic policies. Demand for Ukrainian exports
declines sharply, capital outflow speeds up, budget runs in sizable
deficit, and weaker currency and sharp reduction in household
incomes push the economy into new deep recession.
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Some characteristics of the scenarios
realistic
optimistic
GDP growth, % (mid-term)
3-4
5-6
Budget balance, % GDP (2012)
-4.5
-3.3
CAB, $ bn (2012)
-1.0
-1.5
FDI, $ bn (2012)
4.8
6.5
FX Reserves, $ bn (2012)
22.0
32.0
depreciation
(autumn 2010)
slight appreciation
UAH-dynamics:
Government in economy
intervention and
privileges
deregulation
Privatization
redistribution of
state property
transparent
contests
Debt
T-bills pyramid
sustainable
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
20
Realistic scenario:
assumes that the global economy remains weak, but the process of
recovery continues to strengthen in 2010-2012 .
External demand for the Ukrainian products (metal, chemical industries)
remains weak and unpredictable.
Weak domestic demand, relatively stable world crude oil prices, 30%
discount for imported gas, helps to curb inflation, and imports of
goods that narrow current account deficit.
High deficit of public finance at least in the short- and mid-term.
Depreciation pressure will not be weak but NBU will continue to support
UAH.
Investment attractiveness of Ukraine remains depressed and
productivity, efficiency and effectiveness of the economy are frozen at
an insufficient level.
Debt repayments, including sovereign debt, seem quite manageable
for 2010-2012, but worsening since 2013.
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
21
Optimistic scenario:
global economy enters a soft but relatively stable recovery path
and euro-zone economy restricts its imbalances.
External demand for the Ukrainian products slightly restores.
Continuation of the IMF-program helps to maintain investors’
confidence at a comfortable level.
Implementation of tax reform, business activities stimulation
(slight decreasing of hidden economy).
Worsening of CAB that reflect higher domestic demand,
expansion of technological imports from EU (cheaper due to UAH
appreciation).
FDI inflow, particularly due to expansion of privatization
processes, stimulates appropriate economic growth.
Foreign debt is balanced (IMF, World Bank, other IFI’s financing),
UAH appreciation.
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Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
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Further developments:
restructuring the management system, eradicating corruption, increasing
responsibility and new governance require significantly more time,
realization of the optimistic scenario is much more complicated, since
macroeconomic tasks are added to problems of the structural and
institutional transformations, which are principally new for Ukraine.
Even if some “traditional” sectors (i.e. metallurgical or chemical industries)
remain an important component of the economy, they will not continue
to be a moving force for the development of the whole economy, unless
companies change their production for high level of added values.
Activation of the projects oriented for the football championship Euro-2012.
Use potential in those sectors of the economy, which might be achieved
either by the positive economic dynamics of the whole economy, or by
their geographical position of the country – logistics, tourism,
construction, and the automobile industries: customs procedures
with neighbouring countries, significant increase in the quality of roads,
transport services and infrastructure.
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
23
Further developments (cont.):
Contradictions:
social protection vs sustainable budgets,
currency appreciation vs competitiveness,
effective privatization vs employment,
wage and income growth vs disinflation and UAH-depreciation,
technological imports vs CAB balance …
The restoration of the public trust – a prerequisite of the end of
the crisis – will depend on sustainable growth of the population
income, abidance by the principle of social fairness by the state,
and protection of human rights and interests.
V.Yurchyshyn
Scenarios for economic and political developments
in the medium and long-run. Case of Ukraine
Ukraine, the European Union and international community:
current challenges and
the agenda for overcoming the stalemate
Thank You for your attention
V.Yurchyshyn