January 6, 2017


“Three years after the Revolution of Dignity, the Ukrainian economy has stabilized and is ready for growth.

…An unsustainable budget deficit of 10 percent of GDP has now been brought down to about 3 percent of GDP, mainly through cuts in public expenditures. …The government has sensibly reduced the exorbitant payroll tax from 45 percent to 22 percent. Foreign payments have reached balance thanks to a necessary devaluation of the hryvnia, and the exchange rate has stabilized on the market. …

With the nationalization of PrivatBank on December 18, the National Bank of Ukraine (NBU) has nearly completed an impressive cleansing of the corrupt and undercapitalized banking system. …

Ukraine has carried out major structural reforms. The unification of energy prices deprived corrupt gas traders of up to 8 percent of GDP. The e-declarations of wealth will deal a major future blow to corruption. The ProZorro public procurement system does so as well, and so do deregulation and improved corporate governance.

…In the new year, reform of the state administration should finally start in cooperation with the European Union. The byzantine top government structures need to be simplified, modernized and opened up.

Acting Minister of Health Ulana Suprun has launched the first real reform of the Ukrainian health care system. Minister of Education Lilia Hrynevych is sensibly trying to restore the 12-year school system that was vandalized under Viktor Yanukovych. The most important reform of the state is the judicial reform that was legislated last June. A new Supreme Court is supposed to be composed in March.

…Current forecasts suggest 2-3 percent growth in 2017, but it should be the year that Ukraine takes off with a much higher growth driven by exports to Europe, the Middle East and China. Lower inflation and interest rates should spur credit expansion and drive higher domestic investment. Energy production should rise with lower taxation. …

In view of Ukraine’s substantial reform attainments and embattled position, one would hope that the international community would mobilize $5 billion a year in international investment credits to compensate for some of the great damage Russian aggression has caused to the Ukrainian economy.

– Anders Aslund, writing on the “Ukraine Alert” blog of the Atlantic Council on January 3 (see http://www.atlanticcouncil.org/blogs/ukrainealert/2017-should-be-the-year-ukraine-s-economy-takes-off).