The Institute for Economic Research and Policy Consulting - Kyiv

In October, the USAID Leadership in Economic Governance (LEV) Program held its final event. The project lasted for three years and made an important contribution to the policy of small and medium enterprises (SMEs) development in Ukraine.

Ukraine needs at the very least 5% annual GDP growth to catch up with neighboring countries in economic development. One option would be improved investment climate for higher FDI and domestic-sourced capital investment. Other options are limited given lack of fiscal space and aging capital assets.

Business in Ukraine is slowly recovering from the economic crisis that hit the country several years ago. Entrepreneurs have little trust to the government but plan to speed up their growth and want the authorities to provide fair and favorable conditions for businesses.

The Ministry of Finance proposed to reform customs in Ukraine with the aim of better transparency and predictability. The model of the reform and changes in custom procedures is currently debated between the Ministry of Finance and the representatives of the Parliament and civil society. The reform will hopefully be implemented by the end of 2017.

On July 10, 2017, Ryanair, the largest low-cost airline in Europe, announced that it cancels its plans to enter Ukraine due to the failure to sign the contract with Boryspil airport. The decision was a negative blow to the image of Ukraine, which tries to prove that the country is open and friendly to foreign investors.

In 2016, the costs attributed to operating a business in Ukraine have been lower than in a respective index in 2015. In particular, during the past year, Ukrainians spent on average UAH 27,412 for the purposes of compliance with the effective regulatory requirements.

When Ukrainian SMEs are given a choice between two options – to obtain certain benefits for their sector from the government or to make sure that the government creates equal conditions for all enterprises – they choose the latter. This tendency manifested itself in the results of the national “Annual Business Climate Assessment” survey in Ukraine.

What exactly does Ukraine sell to the EU? Has the trade structure changed during last three years taking into account multiple factors such as improved access to the EU market, lower global commodity prices, and economic crisis of 2014-2015?

49% of Ukrainian SMEs said they were inspected by a government body in 2015. These inspections took up to 14 days per year for a business on average, which means that businesses spent around 2 weeks of their operation time on dealing with the officials.

Year 2016 in Ukraine became a year of starting on the economic recovery path. Real GDP growth in 2016 is estimated at 1.4%. It was supported by higher domestic demand. In particular, real private final consumption increased due to higher disposable income primarily attributed to increase in wage income.