Mudrak D. D., Polyviana O. V.

Oles Honchar Dnipropetrovsk National University, Ukraine

INFLUENCE OF UKRAINIAN REVOLUTION ON ECONOMIC STATE OF THE COUNTRY AND FORECASTS OF ITS FURTHER DEVELOPMENT

In this thesis I would like to analyze some of the most important economic problems of Ukraine that revolution had caused. The importance of this investigation is proved by its actuality at this moment. The information flow on this subject is running fast, so it is hard to navigate in a variety of events. Doubtless, our purpose is to systematize up-to-date facts and also predict some of the most possible variants of economic development of the country.

The protracted political crisis is having a palpable impact on the country’s already precarious economic conditions. Fortunately, the European Union, the USA, Russia, the International Monetary Fund and other Ukrainian foreign partners agreed to provide economic support. But they unlikely to commit money until they can negotiate the conditions of a rescue deal with a government formed on the basis of the election result. Those conditions would include painful reforms. The main problem is that Ukraine might not be able to wait that long.

First of all we need to notice that, the Ukrainian hryvnia (UAH) depreciated rapidly over the course of the last few months and fell to an all-time low in early February. As a result, the Central Bank, which had been depleting its international reserves in an attempt to stem the slide, was forced to abandon its crawling peg. You can see detailed information in Figure 1 below. Monetary authorities hope that a weaker hryvnia can help the economy recover by boosting the Ukraine’s exports.

Late last year, Standard & Poor’s raised its forecast for the credit rating of Ukraine in national and foreign currency from «negative» to «stable». But does it rest or Ukraine will have bad changes due to political situation?

To answer this question, we need to take a closer look at some analysts’ points of view. Most of them are skeptical about Ukraine’s growth prospects. Weighed down by twin deficits in the current account and the public sector, rapidly diminishing reserves and stifling external debt levels, it seems that Ukraine is alarmingly dependent upon help from the outside in order to tackle the challenges ahead.

Figure 1. Devaluation of hryvnia for last 3 month

(Source: finance.liga.net)

Against this background, Focus Economics Consensus Forecast panelists expect Ukraine’s 2014 GDP to grow only 1.0 %. Panelists are also increasingly pessimistic about the prospects for recovery next year and slashed their 2015 GDP growth forecasts from 2.4 % expected last month to 1.6 %.

Based on long-term intelligence Moody’s Investors Service agency expects 2014 growth in gross domestic product (GDP) of Ukraine by 1.5 % (after a year of decline by 1 %). IMF and Standard & Poor’s have more moderate estimate to Ukrainian economy: in their view, Ukraine’s GDP in 2014 would increase by 1 % after the current recession by 0.3 % – 1 %. And, that is quite natural, the Cabinet of Ministers of Ukraine is much more optimistic about the prospects for the country’s economy: 2014 draft budget is based on a forecast of 3 % GDP growth.

Ukrainian and international analysts have noted improvements in the banking sector. Reducing interest rates favors the influx of capital into the economy.

The structure of Ukrainian exports on the basis of 2013 remained stable, despite the negative external and internal factors. Now the share of EU countries in exports for the year is 26.6 %, the share of CIS countries decreased is 35.9 %. The top-10 countries to buy Ukrainian goods you can see in a Figure 2 below.

Figure 2. The top-10 countries buying Ukrainian goods

Agricultural sector provides about 25 % of foreign exchange earnings from Ukrainian exports, in particular, exports of grains and oilseeds. The main export destinations AIC of Ukraine are countries of Asia, the Middle East in particular, as well as the European Union and the CIS countries. Fall 2013 opened new large market China to Ukrainian farmers.

To summarize everything that have been told, we would like to underline the bad economic state of Ukraine, that worsened by unstable political situation. The lack of government budget, the devaluation of the hryvnia, the presence of enormous international debts – that’s only some of the Ukrainian economic problems. The best foreseen economic movement direction is to stop the country’s slide, to stabilize the currency rate, to ensure timely salary and pension payments, to win back investors’ trust and to create new jobs. Another priority is to return to the European integration path.

The list of references:

1. Barrientos M. [Electronic resource] (Date of application: February 21, 2013) / M. Barrientos, C. Soria //  The World Factbook. –  Mode of access: http://www.profiz.ru/sr/7_2011

2. Lomakin V. K. World economics: The textbook for students / V. K. Lomakin. – М.: Finance, UNITY, 2008. – 727 p.

3. Hugh E. [Electronic resource] (Date of application: May 7, 2013) / E. Hugh // Ukraine Economy Watch. – Mode of access: http://www.ukraineeconomy.blogspot.com

4. Thompson M. [Electronic resource] (Date of application: March 3, 2014) / M. Thompson, G. Wallace // Ukraine crisis: Why it matters to the world economy. – Mode of access: http://www.money.cnn.com

5. Ukraine [Electronic resource] (Date of application: February 16, 2014) // The Heritage Foundation. – Mode of access: http://www.heritage.org/index/country/ukraine