Only politicians who promise pie in the sky and boast of Ukraine’s so-called economic victories can benefit from the target 4% economy growth projected for 2001. Such are the findings of a survey done by the Agency for Humanitarian Technologies under contract with Ukrsotsbank.
In the opinion of the survey’s authors, such a target means that “Ukraine, as before, does not even try to come any closer to those East European countries that have declared their intentions to integrate into Europe.” Because even if such growth occurs, it will never impact on the living standards of Ukrainians.
No long-term indicators of economic growth have been created in Ukraine, the survey continues. In particular, bank rates for loans to the economy, as well as the difference between interest rates in Ukrainian and foreign currencies (contrary to the present currency stability) indicate expectations of devaluation. Despite the excessive liquidity of the banking system, domestic loan activity has not increased, and the 19% investment in GDP has merely replaced retired capital.
By late 2001, the survey continues, we are to expect increasing capital flight (the opposite, incoming capital is most important for currency stabilization and filling reserves, but Ukraine cannot count on this, since “the capital forthcoming due to privatization will be low, as it has been, while only the unsophisticated or political babes in the woods would pin their hopes on IMF loans,” the survey says). Worsening trade, the document continues, is likely to affect the trade balance.
These factors, strengthened by the political confrontation before the coming parliamentary elections, could derive Ukraine of foreign funding, leaving it face to face with its domestic problems and foreign debts on his own.
According to the survey, an economic and currency slump in Ukraine in 2001 is unlikely, since the main financial markets are reliably regulated and any efforts by financial speculators to upset the apple cart can easily be counteracted, either by sharply raising reserve funds ceilings or by reverting to administrative measures. The hryvnia will continue to strengthen during the first two quarters, to give way to devaluation pressure in the fall and winter, reaching 6.10-6.20 to the dollar, the authors of the survey predict. This will not have any significant affect either on the incomes of Ukrainians or on domestic business activity. Meanwhile, the survey predicts relative calm on foreign financial markets, with no major upheavals awaiting the world’s basic currencies and the currencies of the Central and East European countries joining the European Union. Despite initial predictions of devaluation, the Russian ruble is expected to rise due to relatively high prices for oil and natural gas. Negative expectations, however, could surface in Russia at the end of 2001 as a result of lower prices on mineral resources and large foreign debt payments coming due. According to the forecast by Credit Swiss First Boston bank, the ruble will sink to 31 to the dollar.
