Without reform and investment: how to grow Ukraine’s economy in 2018

The IMF binds the slowdown in Ukraine’s economic development this year with the blockade ORDO. However, it was expected that subject to a substantial acceleration of structural reforms, in 2018, the GDP growth will be about 3.5-4%. But the world Bank has criticized the ineffectiveness of the implementation of projects of the Ukrainian authorities and downgraded the forecast of Ukraine’s GDP in the next year to 3.2%. Where to find the reserves of economic growth, “Apostrophe” says the Executive Director of the International Bleyzer Foundation, President of the Harvard club in Ukraine, economist Oleg Ustenko.

Ukraine “fell” in 2014-2015 cumulative 17%. In 2016, managed to win a 2.2% growth. This means that in 2017 Ukraine reached approximately 85% of its GDP in 2013. Obviously, the country who lost so much and which was able to win in 2016, had to try to grow much more rapidly compared to the levels shown a year earlier.

Originally forecast for the current year was 3% — the figure laid down by the Cabinet in the Budget 2017. Forecast Bleyzer Foundation was not so optimistic at 2.5%. However, after blockade of Donbass and sluggish economic reforms it became obvious that the predictions will be reduced.

Due to what the economy will still grow? This year will help very smooth rising dynamics of Ukrainian export markets (metallurgy, chemistry, agriculture).

But it must be remembered that this increase is insufficient for a country like Ukraine, and ideally it should start from 5%. Why is it necessary to focus on this figure? Because that’s how much we pay only for the service of the external debt. In addition, there are many studies supporting the thesis that countries that can effectively fight poverty, has grown from 5% a year.

Ukraine is one of the poorest European countries, is ranked second from the bottom, for us — only Moldova. But we improved our position and were on the penultimate step, not because it was better for us, but because in Moldova became worse. But with the current economic model of Ukraine will not be able to show growth of 5%.

To change this, you need to try to go to the so-called investment growth. And for that you need to improve the quality of the business climate in the country. The money goes to States, which like Ukraine are five levels below investment grade rating, according to Fitch and Standard & Poor’s. Because we have the problem of corruption, and insufficient protection of property rights, poor judiciary and underdeveloped financial system.

Therefore, the revisions of the forecasts is important, but not essential, since they show only that the country is going to use the old growth model, export-oriented.

Oleg Ustenko, Executive Director of the International Bleyzer Foundation, President of the Harvard club in Ukraine, economist