Facing realities instead of raising social standards

The preliminary count of votes in the presidential election runoff shows a clear, if unimpressive, lead of Viktor Yanukovych. Shortly before this, exit-polls showed a similar result. What are the first steps that experts believe President Yanukovych will take in the economic sphere? Will he manage to fulfill at least some of his election-campaign promises, given the limited influence that the head of state can exert on the economy in his current position and the domestic political situation? Apart from promising to finally raise social standards, Yanukovych also declared that Ukraine must be among the world’s 20 economically most developed countries (G20) within 10 years. The program notes that the application of the state-of-the-art investment-oriented innovative model of development will be the linchpin of dynamic transformations. Yanukovych guarantees, from 2010 onwards, annual GDP growth, as well as an increase of the level of innovation-oriented businesses and direct foreign investments in Ukraine to 50 billion dollars in 2014.

The Day has asked some economic experts what they expect from the Yanukovych presidency and what they would advise him to do first of all.

Valerii HEIETS, director, Institute of Economics and Forecasting, National Academy of Sciences, Ukraine:

“There are no budgetary resources to fulfill election-campaign promises. The new president of Ukraine is going to face extremely difficult challenges. For example, there are a lot of problems in the financial sector, which cannot be solved without the participation of international capital. It will be difficult to achieve significant economic growth in 2010 under such conditions. Let us also not forget about the problem of foreign debt, a large chunk of which is to be paid off or rescheduled this year. In my view, one should revise social commitments and refrain, to a large extent, from the raising of wages and pensions because the economy lacks financial resources at the moment. But if the promises are to be kept, one should increase tax burdens for big business, capital, luxury, and super-profits. As Yanukovych draws support from big business, this would be quite a challenging step. So we can expect social commitments not to be fully met. On the other hand, there are good chances that Yanukovych will attempt to fight poverty by increasing the number of employed people.”

Oleksandr PASKHAVER, president, Center for Economic Development:

“The situation of the national economy, as far as the ability of the state to respond to economic challenges is concerned, resembles that of 1994. Therefore, what is needed today is carefully-balanced long-term activity which will simultaneously solve three problems. The first, short-term one is to work out a policy aimed at getting Ukraine out of the crisis. In this context, there should be an integrated approach to the question of debt repayment and fulfillment of social promises. The second, medium-term problem concerns the implementation of structural reforms indispensable for solving the abovementioned current problems. And the last, long-term problem is to stop Ukraine’s sliding to the fringe of the world’s raw-material boondocks. To solve these three interconnected problems, one must show stubbornness, ideological integrity, and humane attitude to people. Incidentally, I’d like to note that I highly appreciate the fact that the Tymoshenko government managed to ward off a collapse of the entire economic system and individual economic facilities in 2009. These gains should be kept intact. The new president is expected to take adequate actions. Meanwhile, politicians – both the future opposition and the government – must clearly say how and at the expense of what they are going to respond to the current challenges. If they fail to do so, nothing good can be expected.”

Ildar GAZIZULLIN, senior economist, International Center for Policy Studies:

“We expect the newly-elected president to address the state’s economic woes with two main steps. Incidentally, the first of these has already been partially implemented: some budget expenditures have been slashed. Secondly, we expect changes in the energy policy, which presuppose, among other things, higher prices for domestic gas. As for implementing the election-campaign programs, I can say there were no concrete documents that oblige him to fulfill them. They were just promises. So it is difficult to say if they will be duly fulfilled. Of course, when new laws have been passed, Viktor Yanukovych will be able (if he is inaugurated), to nominally raise minimal wages and increase pensions. However, the state treasury is currently empty, and there is no money to make good on what was promised.”