Truth about economy to be revealed after elections
I think you would agree that it is too tiring to live in a world of constant bad news. That is why any discussion on the topic “The end of recession: the hryvnia is bouncing back” seemed very appealing. The readers already had enough of hearing words like recession and crisis. Unfortunately, this was only a trick played by organizers, who must have understood the need for good news. So the above statement was followed by the question: “Will this last long?”
Invited independent experts gave their answers to this question in a straightforward and perhaps even somewhat cynical manner, which is more typical of doctors rather than economists. Oleksandr Riabchenko, director of the International Institute for Privatization, Property Management, and Investments, joked: “As soon as the economy begins to recover, … an epidemic breaks out. … It is a sort of rule for our state — there has to be some sickness.”
Riabchenko explained the reason why state officials now think it is a better idea to compare the statistics not with the last year’s data but with those we had, let’s say, in the previous quarter. “This year our economy has receded by 20 percent, and if we keep comparing the numbers with the last year, we will always be speaking about continuing recession — 18, 16, or 15 percent down,” said Riabchenko.
According to him, this methodology is mistaken, even though this is what they use it time of crisis in Europe and the USA. If we apply it in Ukraine, it will turn out that we are making great progress: up 4.5 percent in the second quarter and 3.7 percent in the third. If we proceed from these numbers, it will look like the recession is near the end. Riabchenko expects the fourth quarter to be equally “successful.”
At the same time, he says: “Nevertheless, I would not say that the recession in Ukraine is over. I am sure that no one, except those who have high positions in the government, would claim it is over.” According to him, we will learn all the truth about the situation in our economy only after presidential elections. He is concerned that “if the International Monetary Fund doesn’t give Ukraine the next tranche, it is quite possible that there will be a great amount of money printed to pay salaries and pensions as the elections are approaching. Then the situation will change very rapidly.”
Riabchenko also says that Ukraine is sufficiently civilized in terms of its politics to make predictions about economic conditions. The reason is that political needs easily take the upper hand over economic ones. However, he predicts that Ukraine will be making up for the 20 percent it has lost in time of the crisis for another four or five years, but it will definitely reach its pre-crisis position.
Another person to use medical terms in characterizing economic processes was Erik Naiman, an independent expert. According to him, the current government in its attempts to cure Ukraine’s economy is using the medieval practice of blood-letting. The expert is certain that this is not the right way to do it. “When this was done [in the past], the fever would go away and the sick person would either recover or die,” explained Naiman. He hopes that this won’t happen to Ukraine, even though it is seriously ill. He said that according to the official data, the nominal 12-month GDP (without the inflation rate) in the second quarter has gone down for the first time since 2003. “This is nonsense because the inflation rate over 12 months would be no less that 15 percent,” said Naiman. His conclusion is that the actual rate of decline is “fairly high.”
The expert mused over potential scenarios: “If we get the next IMF credit tranche, it will be a disaster for the hryvnia, because all this money (an equivalent of approximately 31 billion hryvnias) will be quickly converted into the national currency and injected into the economy, and we’ll see a spike in the exchange rate. After about two months, just before the elections or after the first round, another upsurge in inflation will occur. If we don’t get the tranche, we’ll face a different kind of calamity — no money to pay pensions and government employees’ salaries with.”
However, Naiman’s biggest worry is the state budget. Its weakness manifests itself in the data on the profitability rate of the state’s internal bonds. No respectful bank will pay 29.5-percent interest rate on deposits, because this sounds like a declaration of a near bankruptcy.
Borys Kushnirchuk, an economic expert, immediately promised not to use any medical terms but failed and spoke of the financial “paralysis” in the regions. He perceives its symptoms in the actions of the State Treasury, which is robbing the local budgets by not transferring due payments to them. The state budget is also empty, which is evidenced, for example, by the unlawful failure to return the deposits to the participants of the Odesa Port-Side Plant auction, which was declared invalid. Kushnirchuk claimed to favor the IMF, but, on the other hand, said its credit had done damage to Ukraine. He believes that despite our government’s failure to comply with all the requirements set by the IMF, it will receive the next tranche.
We will manage somehow. This in itself is good news, even though the various scenarios discussed by the experts are not ruled out.
