Risks of Success
The May 29 Cabinet session took place in an almost exalted atmosphere. For the election of Volodymyr Lytvyn as parliamentary speaker (of which the prime minister did not say a word in his introductory speech) marked the end to the period of political uncertainty and gave the government an opportunity for more or less stable work. Thus Anatoly Kinakh naturally focused his brief speech on the results of the year’s work, noting in the very beginning that his government does not play political games, shuns (“does not speculate on”) pie- in-the-sky and is instead doing concrete work, strengthening political stability and constructive cooperation between the branches of power as the basis of economic growth.
By the first anniversary of its being in office, the government had published a small brochure, Social and Economic Growth in Ukraine, a concise account of its achievements and intentions. In particular, the brochure says that ensuring “a balanced inflation rate” and a favorable correlation between individual well-being and national economic development are the key points in the government’s economic policy. What attracts attention among the conclusions drawn from the analysis of macroeconomic indicators is the claim that our economic growth is steady and irreversible.
Tellingly, this claim is not being questioned even by the potential critics of the government’s economic policy. An International Long-Term Studies Center forecast says the Ukrainian economy will rise 4.5% in 2002 owing to still positive dynamics in domestic demand. In 2003 and 2004, the expert center believes, accelerated development of the world economy and more active government policies will bring Ukraine’s GDP up by 5.5% and 6% respectively.
But, unlike the government, which must have decided not to dampen the exultation by disclosing economic problems and risks (the brochure mentioned gives this just a cursory glance), the forecasters do point out obstacles to economic development. Among them is reduced household consumption, which researchers think could bring down demand and consumption on the domestic market (which rose by 20% in the first quarter), reduce investment demand, as well as raise prices (as part of restoring market equilibrium) held in check by administrative methods before the elections.
Simultaneously, the forecast indicates that the Ukrainian economy will be facing its main problems in the field of public administration due to political instability. Verkhovna Rada dead lock could be a major factor of political uncertainty. The researchers predict that parliamentary factions could fail to form a formal majority, thus being unable to make sound decisions on the economic policy.
However, further considerations cause a deep rift between the views of the government and its critics. The forecast authors oppose the government’s principal goal of supporting the domestic producer and claim that this leads to conflicts in various economic sectors, such that the government has to protect the interests of one group and then another (this might also show simply that government leaders are keeping their options open). The study says this factor is responsible for the strategic shortcomings of government policies. In addition, the government is blamed for intervening in the economy, protectionism in metallurgy and automobile manufacture, undue support for agriculture, and other faults, including the absence of fair competition.
We think the government should challenge the authors of these theses. Moreover, the first anniversary of being in office is a good occasion for holding a roundtable with serious opponents from business and expert circles.
