Uncover the secret of the phenomenal growth of the economy of Ukraine

Раскрыт секрет феноменального роста экономики Украины

© RIA Novosti / stringerthe Cabinet of Ministers of Ukraine in late October approved the macroeconomic forecast for the years 2020-2022, which contains two scenarios — conservative and optimistic.Under the conservative scenario, in the next three years is expected accelerating economic growth, 3.7%, 3.8% and 4.1% respectively.According to optimistic — 4.8%, 5.5% and 6,5%.The basis of the calculations of the state budget is laid traditionally conservative scenario. He, as is easily seen, does not correspond to the recently approved Programme of activities of the government, which assumed GDP growth of five percent in 2020 and by seven percent in the next four years, the result was to give an increase of almost 40% in five years.
Moreover, the optimistic scenario does not meet previously announced expectations.This, however, did not bother the Prime Minister Goncharuk, who was at the briefing, devoted to the adoption of macroeconomic forecast, on its previous promises not remembered.But business not only and not so much in the arbitrarily varying predictions, but in the fact that all of these predictions sucked from the finger, and the biggest issues is the predicted stable growth of the Ukrainian economy.Outset: by the end of this year, Ukraine’s GDP has the potential to grow more than three percent. The current forecast of Ministry of economic development of Ukraine is 3.2%. But in the end, the growth may be even a little more. Thus, the current year could be the fourth in a row, when the country recorded economic growth. Starting in 2016, it was 2.4% and 2.5% and 3.3%.Significantly, these growth rates are significantly higher than in Russia, which in those same years, recorded an increase of 0.3%, 1.6%, and 2.2 percent. In the current year is projected at about one percent. This allows to speculate on that, saying that Ukraine isn’t all that bad. Again — plans for the further growth of the whole Gromada.However it should be taken into account, based on what the GDP growth in the country Maidan.First of all, striking a low base of comparison. Real GDP growth is calculated by dividing GDP for the year to the amount of the previous year, adjusted for the price indices (GDP deflator index). Of course, the smaller the indicator in the denominator, the easier it is to obtain the greatest amount of growth. Ukrainian GDP in 2014-2015 collapsed, according to official data, 15.8%, and by the end of 2019 will not reach even 95% of the level in 2013. In other words, given the extent of the fall recovery is very slow.And despite the fact that the low base of comparison did not arise in 2014-2015, but much earlier — during the time of the collapse of the 90s. it is Necessary to understand that Ukraine is the only Republic of the former USSR, which of GDP by the end of 2019 is unlikely to reach 2/3 of the GDP of the USSR of 1990!It is also worth a look due to some sectors and the growth of the economy.By the end of 2018, the index of industrial production in Ukraine amounted to only 82% from 2013. In 2019, Ukrainian industry growth is not showing at all. Thus GDP by the end of 2019 will be restored to approximately 95% of the level in 2013. Therefore, Ukraine is continuing deindustrialization — and the industry does not act an engine of growth.It is easy to guess that in the sphere of material production during these years increased agriculture. But the structure of agricultural production if that has not changed. It is, as before, is based on the cultivation and sale of grains and oilseeds. That from all points of view is not a robust basis for growth. First, it’s a risky form of agriculture, depending on weather conditions, which for several years Ukrainian farmers openly carried. Second, the growing number of long-term crop depletes the land. Thirdly, the production of grain and oilseeds is characterized by a relatively low level of added value. In any case, no developed country does not put at the forefront of its prosperity to the production increase in crop production.Long-term GDP growth always has an investment basis. Whether it’s China, Vietnam, Malaysia or Turkey — long-term GDP growth in these countries was associated with the growth primarily the processing industry and infrastructure, which required significant capital investment.Capital investments in Ukraine the situation is very bad.In 2008 the volume of capital investments in Ukraine amounted to $ 52 billion — and not to say that was sufficient. After the global financial crisis it fell by more than half. However, in 2011-2013 recovered somewhat and stably exceeded 30 billion dollars a year. At the end of the 2018 capital investment amounted to only $ 19 billion.Foreign direct investment after three years of flight of investors in the years 2015-2017 in the last year has ceased to fall — but only just. No serious attachments there is not expected.In other words, current growth is… increase consumption.Consumption still can increase due to transfers of Ukrainian migrant workers, which gives an increase from 1/3 to 2/3 of the entire economic “recovery”. Well, due to the accumulation of debt. Since 2014, the external state debt of Ukraine (the government plus the national Bank) increased from 31.7 billion to $ 50.2 billion dollars.You can still remember the tricks with the construction of the pyramid of government bonds. And all this against the backdrop of the speculative strengthening of the hryvnia, almost complete elimination of the banking system from financing of the real economy in favor of participation in speculation and so on.
GDP growth based on increasing consumption, in principle, also valid. But only after the creation of the corresponding capacities, as in the same China or South Korea. So it was based on producing added value for the consumption of domestically produced products and so on.Here’s a simple comparison.According to open sources, Russia this year are bought in the EU 45 thousand dairy cows for $ 110 million. In 2019 it will have no GDP growth, as imports reduces GDP. But next year GDP growth will be at the expense of milk and all that from it is produced.In Ukraine the number of cattle continued to decline — since October last year, it decreased by 5.1% and was the lowest in modern history of Ukraine. Cutting cows in the current year, of course, will give some GDP growth Ukraine — meat goes on sale and the processing and so on. But in the next year opportunities for meat and milk production to decrease.This, in fact, the essence of the differences between GDP growth and investment based on the consumer. With all the consequences in the medium term. Well, given the fact that the government Program Goncharuk does not contain any tools that could contribute to a substantial increase in investment, believe in a stable rise of the Ukrainian economy in the foreseeable future.Sergey Levchenko

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