Signs of Economic Recovery in Ukraine

Ukraine/October 2015

Recent Ukrainian signs of economic stabilization evident in July and August 2015 prompted a discussion among economists about Ukraine’s ability to restore economic growth. Experts share the view that it is crucial to maintain the current balanced policy and structural and institutional reforms as Ukraine heads on the road to recovery.

IMF’s First Deputy Managing Director David Lipton stated that even though the economy is fragile, positive signs can be seen. Mentioning the stabilized exchange rate, he also noted that “domestic-currency retail deposits have been increasing, and the pace of economic decline is moderating.” The IMF Executive Board’s discussed the issue of the second tranche of the EFF program for Ukraine.

Angela Bochi, ICPS economic expert, also expressed optimism regarding the Ukrainian current position stating that the economic outlook for Ukraine as predicted by the Ministry of Economic Development and Trade foresees that Ukrainian GDP will grow by 2%.

According to Ms. Bochi, encouraging developments in the industrial production point to economic recovery. The industrial production recorded the best results of the last fourteen months in August 2015 and international reserves were at an almost one-year high. Ms Bochi hopes that the economic downturn was at its peak in 2014 and at the beginning of 2015, and that Ukraine is now on the road toward economic recovery.

Among the positive messages, worth noting is also the substantial financial and political support of the international community after the signing of the agreement between Naftogaz, Ukraine’s state-run oil and gas company, and Russia’s Gazprom on 29 September, ensuring fuel supplies for the winter ahead.

According to the World Bank, Ukraine’s economic recovery depends on whether the authorities continue implementing much-needed macroeconomic and structural reforms, even as periodic flaring up of conflict adds to uncertainties. The improving position of Ukraine in the World Bank’s Doing Business rating is one of the indicators of the reforms’ success. If reforms continue (reform of tax system, deregulation and trade and labor liberalization), a gradual recovery is possible starting from 2016. Such recovery is expected to be driven by net exports, capital investment and privatization of over 300 state enterprises.

Nadiya Omelchuk

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