2015 was a year of many wins and losses for Ukraine. In the first half of the year, Ukraine faced a near-perfect storm of escalating military conflict, falling commodity prices and political instability. As a result already low export revenues went even further down and foreign currency reserves dropped to 5 billion dollars.
It is settled that provisional application of Deep and Comprehensive Free Trade Area (DCFTA) between Ukraine and the EU will start since January 1, 2016. In a response, Russia is expected to increase trade barriers vis-à-vis Ukrainian goods.
Today, when we talk about increasing the export capacity of Ukraine, we can hear about the need to focus on exporting the high-tech products, products with high value added and a high level of processing – it seems very attractive because all of the above are important “export benchmarks” which should be strived for.
The forthcoming heating season of October 2015–April 2016 may be the most challenging season for the Ukrainian energy sector since Ukraine’s independence. Each subsector of energy sector has its own challenges in addition to the general problems such as the military conflict in the East, currency depreciation, debt accumulation, and high inflation.
In February 2015, the Institute for Economic Research and Policy Consulting (Kyiv) held its regular quarterly survey of industrial enterprises as a part of its Business Tendency Survey. The respondents were asked a question “Can your company use the possibility to apply a reduced rate of the single social contribution?”. Let’s take a look at the results.
According to the Business Tendency Survey, a quarterly survey of industrial enterprises in Ukraine carried out by the Institute for Economic Research and Policy Consulting (Kyiv), the biggest obstacles to production growth in Ukraine in May 2015 were low demand, liquidity problems, excessive taxation, and unstable political situation.
Unlike in the EU, where SMEs are among Horizon 2020 priorities, in Ukraine the role of SMEs in innovation and S&T development is underestimated on the policy making level.
The ongoing conflict and economic downturn have taken a toll on Ukrainian businesses across the sectors and sizes. For them, the current political and market uncertainty would make a zero-growth scenario look like a positive development, which, however, is not yet in sight.
The economic situation in Ukraine in 2015 and 2016 will depend on progress in externally supported reform program and on stabilization in the Eastern Ukraine. Fiscal consolidation, decline in real wages and unemployment will cause reduction of real private consumption. Weak hryvnia, despite dragging down consumption and investments, helps to increase fiscal revenues and narrow the current account deficit.
In March, Ukraine’s government adopted the Action plan for reforms in 2015 and 2016 while the IMF board approved four-year USD 17.5 bn extended arrangement under the Extended Fund Facility (EFF). The EFF supports ambitious program of Ukrainian authorities, which would in IMF words ‘put the economy on the path to recovery, restore external sustainability, strengthen public finances, and support economic growth by advancing structural and governance reforms, while protecting the most vulnerable’.