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Internal and external causes of economic
crisis in Ukraine.
Possible
solutions.
The economic recession in Ukraine, declining standard of living of the general population, as well as rising unemployment - all these
effects, which leads to a deep economic crisis in Ukraine. In this work considered the main reasons of the situation in Ukraine, the realization of which
will help effectively and rapidly develop effective
measures out of the economic crisis.
1. For a long time
in Ukraine operated a policy of increasing the incomes of the population, while
productivity growth rates were ignored, as well as the possibility of providing
the population with necessary food items. Consequence of these economic
policies became inflation. In 2007, as compared to 2000 population incomes grew
in 4,8 times, consumer goods production only doubled, and GDP per person – only
in 1,8 times. According to official figures, inflation in 2007 was 16,6%
(government declared that it does not exceed 12%).
2. Major cause of economic crisis in Ukraine is the growth of the foreign trade deficit (growth of subzero balance), which by the end of the year will exceed 20 billion dollars. Ukraine's accession to the WTO and the reluctance of authorities to carry out policies in support of national producers, have resulted the import of consumer goods, services, and industrial goods, while domestic production was not sold.
3. Ukraine's
economy is constantly reinforced by foreign borrowing. In the first half of
2007, the amount of corporate debt reached 85 billion dollars, that in 2,2
times higher than the reserves of the state. The current IMF loan of $ 16.5
billion was calculated on the repayment of previous foreign debts. But then it
must be returned that could result higher taxes, the sale of state property and
the general decline of incomes.
4. Dependence of
the hryvna from fluctuations of foreign currency.
One of the key conditions for the stability of the Ukrainian hryvna, introduced in September 1996, was its “attachment " to the U.S. dollar.
In December of 1999
ratio in this currency pair has stabilized at the level of "5 to 1"
and remained virtually unchanged (plus or minus 10 %) for 9 years.
In the first half
of the 90 on the background of total inflation of the previous currency,
Ukraine experienced the first wave of "dollarization".
The U.S. dollar for
several years was the de-facto second currency, for which one could buy almost
any product. While the behavior of monetary couples has remained relatively
stable, the actual existence of a dual currency virtually had no effect on the
development of the economy. However, the crisis of 2008 dramatically changed
the picture.
To step back from influence of the course to any kind of goods, Ukraine could not, if only because - fuel dependence (to the value of any product is added the "dollar" price of fuel, needed for transportation).
However, we should
strive for exchange independence. The country is close to the elimination of
the negative balance in foreign trade, so it should not be a real shortage of
foreign currency now. Psychological lack of foreign currency will be able to
repay only an understanding of buyers that pay in hryvna cheaper than pay extra
for "monetary illusion"
5. Excessive
dependence on the export of Ukrainian metallurgy.
The main problems
of Ukrainian metallurgy are the excessive dependence on export markets, low
production of quality rolled products, and poor technical condition of the
industry, because Ukraine has the highest share of exports among the largest
producers and its concentration in several regions (EU - 19%, Russia - 18%,
Turkey, Asia). Ukraine lost market share in China, as well as positions in the
domestic market. The problem is outdated technology, in particular, a large
proportion of the domain technologies than other manufacturers have, and their
vulnerability to energy price shocks, which limits the production of quality
products.
Today, the global
steel industry is concentrated, but no Ukrainian manufacturer is included in
the twenty largest companies, only 3 are in the top 80 companies
(“ArcelorMittal Krivoy Rog" is part of ArcelorMittal).
The main measures for the improvement of the Ukrainian metallurgy are deepening of the structure of production, investment in technology, increasing of productivity, development of the domestic market, integration in world markets.
In order to overcome and mitigate the consequence of hard economic crisis requires radical changes in the economic policy of the state. The priority should be not only monetary income, but also the development of production, productivity, and only on this basis - revenue growth. It is necessity to introduce a regime of economy at all levels of government, including at his department, to suppress unwarranted and hidden costs and abuse, to tighten control over costs.
It is also
necessary to promote development of Ukrainian domestic market by reforming the
lending policies of the productions, serving the needs of the domestic market,
develop programs for the development of production industrial and manufacturing
goods with the prospects of demand in the global market, as well as to
differentiate the export potential of Ukraine.
Constitution should
also be reformed and enact laws on the regulation of the Verkhovna Rada.
In conclusion, we
can give a small forecast of the situation in Ukraine by mid-2010:
• GDP growth will
stop up to 5%,
• Inflation,
according today’s situation, will be above 15%
• Increase the
arrival of funds for export, reduced spending on imports
• Next year reduced
real incomes of population, at
least 7-10%
• Unemployment will
raise considerably, because until now there was a rise in the cost of labor,
now it will decrease, and improve our labor market.
In order to reduce
the scale of the disaster, we need a timely and efficient anti-crisis state's
policy.