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’.
Low demand and unfavorable political situation are the major obstacles for the development of industrial enterprises in Ukraine as of early 2015. Such were the results of the quarterly business survey in which Ukrainian businesses assessed the 4th quarter of 2014 conducted by the Institute for Economic Research and Policy Consulting.
Ukrainian SMEs are poorly represented in the European market and do not expect any significant benefits from the free trade zone between Ukraine and the EU. At the same time, they are relatively less afraid of the possible negative consequences of trade liberalization with the EU.
Ukraine introduced value added tax (VAT), which is one of the essential sources of fiscal revenues in many countries, in 1992. The tax became important for Ukraine’s economy as it brings about one third of consolidated fiscal revenues and accounts for near 10% of GDP. However, with years the tax became known for poor administration and fraud. Some loopholes in the administration relate to numerous VAT privileges and exemptions.
2014 was the most difficult year for Ukrainian economy in the 21st century. Ukraine faced economic crisis and military conflict in the East, while Russia annexed Crimea. Real GDP is estimated to decline by near 7% in 2014 due to a drop in domestic demand and weak external demand.
