Economy Awaits Stimulus. Will it get it?
Ukrainian economists more and more loudly warn that the current economic growth could stall. In their opinion, the growth rate could drop to 1- 2% as early as next year. Moreover, the first signs of economic stagnation are already seen. Anatoly HALCHYNSKY, economic advisor to the president, thinks that the low inflation rate indicates sluggish business, while the growing accumulation of manufacturers’ bonded stores points to an unstable market. It will be recalled that the government planned 6% GDP growth this year and intends to keep up this high rate next year as well. Prof. Halchynsky is convinced that these plans are doomed to remain just plans unless additional economic stimuli are applied. In addition, he points out the cyclical pattern of economic growth, and Ukraine is now, according to his calculations, at the end of its growth cycle.
“Does your idea of a three year cycle of economic growth mean that economic growth in Ukraine might come to an end as soon as next year?”
“Why next year? Even this year we see a considerable, almost two and a half times, drop in the rate of economic growth. This is the question of a regular cycle, when production rises for three years and then the growth rate declines. Look at the postsocialist Central European countries: they have all produced a similar dynamics.”
“In general, government economic statistics so far appear quite optimistic. In what sectors do you see signs of a possible crisis?”
“Today, there are very many signs of economic stagnation: such things as reduced overall economic growth rate, decreased investment increment rate, zero inflation, and manufacturers’ crammed bonded warehouses show that it is necessary to apply additional instruments to encourage economic growth.”
“What instruments do you think the government and parliament should apply most urgently to avert the economic slump?”
“The most effective and long-awaited instrument is easing the tax burden, especially for the commodity producer. Besides, trade and small business need additional stimuli. In the longer term, innovations are indispensable. Precisely they will create the conditions for long-term stable growth. The economy cannot be on the rise for a long time without utilizing the most up-to-date technologies.”
“Suppose these measures are not taken?”
“I am not inclined to speak about a tragic situation. The growth rate could drop to 2%. Although this is a normal rate on the world scale, in this country, when we set very ambitious goals, a 2-3% growth is tantamount to a new stage of the crisis. I wish the public were more fully aware of the situation.”
“In other words, you think the government is full of unfounded euphoria?”
“The current growth, at least such high rates, came somewhat unexpectedly. Now we are approaching a situation such that the economic growth rate could decline considerably and we could face stagnation. What is needed in this case is action and resolve. In general, these are in no way new problems: they were outlined in the president’s latest message to the parliament. It is crucial for society, Verkhovna Rada and the government to understand right now that this high rate of growth, 20% in three years, cannot last very long unless supported. Yet, no instruments of such support have so far been found.”
