Mysteries of politics
The nationwide debate on whether the political instability caused by the president’s decree to dissolve parliament will have an impact on economic stability has muddied the waters. For those who want to know Ukraine’s future, now is the time to turn to fortunetellers. As The Day has already reported, Deputy Prime Minister Mykola Azarov was the first to start a discussion with his negative forecast.
There was no need for the president to intervene in this debate, because in doing so he will involuntarily be promoting the government’s successes. But truth is more precious than time, as they say. That is why Viktor Yushchenko made an announcement about the stability of the economic situation in Ukraine and rejected predictions about its worsening because of the current political crisis.
“The economic situation is stable. The exchange market is solvent, the situation with the trade market is normal, because normal balances have been developed. The situation with the budget deficit is being maintained on the control level. There are no threats that this position will make the situation on the stock market unstable,” the president said last Thursday.
Meanwhile, Yushchenko could not help taking part in the election campaign on the side of the political force that he in fact heads: “It is not the current government, as it has declared, that made a real breakthrough in the national economy. For the last six years Ukraine has been developing according to an ascending normal dynamic.” Noting that the GDP dynamic in Ukraine is one of the highest in Eastern Europe, the president also said that macroeconomic tendencies do not depend on “three or four months of somebody’s work or no work.”
What is most interesting is that the prime minister, who last Thursday had to work in the international field, was forced to agree with this. “Everything that is taking place in Ukraine is following the democratic course and will not have any impact on external economic and foreign policy priorities,” Viktor Yanukovych emphasized at the beginning of Ukraine’s diplomatic talks with Lithuania. He gave his assurance that the government will “secure peace and stability Ukraine.”
However, after yesterday’s return to the domestic front, initially the prime minister repeated almost verbatim Azarov’s arguments about the threat of an impending crisis. Later, however, he abruptly changed his tone and made a joyful announcement about the rise of the GDP. “Effective reforms may unite the Ukrainian people, business, government, politicians and, of course, different social groups in our society. The country should be given a new intake of air, drive for development, and this should be done within the shortest possible period. The government has stepped resolutely on this path, a move attested by the results of the first-quarter of 2007, which show that we have an 8.6 percent GDP growth,” said the prime minister, who obviously does not agree with the president about the government’s contribution to our country’s economic development. It appears he is gradually submitting to the pre-election excitement and lightly changing accents according to the situation. After all, the logic of political struggle demands inventiveness.
On what should the average citizen orient himself? Should he run to the bank for his deposit or, on the contrary, bring his next batch of extra pennies? Should he exchange hryvnias for dollars or, like before, give preference to the national currency? Family sages are not making any decisions yet. Everyone’s gaze is focused on the Constitutional Court.
Meanwhile, the government is not correcting its forecasts. International financial organizations are also generally retaining their forecasts for Ukraine. Like before, International Monetary Fund experts think that Ukraine’s GDP growth rate will be 5 percent in 2007. But the inflation rate, contrary to previous forecasts, will be 11.3 percent, not 13.5, say IMF experts. The World Bank has somewhat improved the forecast of Ukraine’s GDP growth rate (from 4.5 to 5.5 percent) but worsened the inflation rate forecast (from 10.7 to 10.9 percent.)
Experts at the Security Service of Ukraine are looking at Ukraine without optimism: “Assuming that today’s political crisis is overcome rather quickly, its economic influence will remain limited...The main task for the nearest perspective is to retain the strict fiscal system,” states a Security Service review.
Azarov reacted to this at once, notifying the population that Ukraine can start legalizing income simultaneously with the implementation of the Tax Code. “We should take decisive steps to liberalize our taxation legislature,” Azarov said, assuring that the current parliament will be able to adopt corresponding laws that envisage an income tax reduction of 20 percent and an 18-percent reduction of the VAT.
What are independent politicians telling us? Experts from the Troika Dialog Company Group say reassuringly that the state of political uncertainty will hardly lead to significant economic turbulence in the nearest future. “But if the uncertainty lasts until the fall, for example, the country’s economic stability will be under threat,” say these analysts, who predict that there may be a 20 to 25 percent reduction in the stock market. If the period of uncertainty lasts too long, the market correction will be more profound than the report mentions. In a word, the country’s welfare is in the hands of politicians, who should grasp that the more drastic their steps, the less support they will have in the elections.
