Week’s balance: growth against all odds, pension-related "unprofessionalism" and snow-covered harvest
Experts forecast growth of Ukrainian economy despite the blockade of the occupied territories of Donbas; the authorities continue their hot discussions with "terribly unprofessional" IMF officials; while the agriculture ministry calculates losses from cyclones – these are the main economic news of the outgoing week.
In Ukraine, disputes keep boiling between politicians and experts on the consequences of the trade blockade of the Russian-occupied areas of Donetsk and Luhansk regions. In particular, the National Bank said that the blockade led to a drop in the output of mining and steel-making companies, as well as the deterioration in the production dynamics of related industries.
The NBU's latest report for April says that after a 4.8% GDP growth in annual terms in the fourth quarter of 2016, in the first quarter of 2017 it slowed to 3% against the backdrop of the trade blockade.
But in order not to alarm the IMF, the National Bank decided to add that the blockade’s negative effect has already been leveled, thanks to improved terms of trade, high external demand, and stable investment activity.
By the way, earlier the National Bank predicted some greater losses for the national economy because as a result of the blockade. Now the situation has changed dramatically. After all, the guru of Ukrainian politics, Director of the National Institute for Strategic Studies, Volodymyr Horbulin, stressed the need of such blockade, claiming that, although it would have negative economic consequences, it would also allow the formation of a qualitatively new social contract in Ukraine for the prevention of the spreading of Russia’s hybrid war and consolidation around the issues of national security.
Finance Minister Oleksandr Danyliuk, who is currently on his official visit to Washington, also believes in the growth of Ukraine’s economy. In particular, he said that in connection with the blockade, the forecast of economic growth had to be revised downward.
"This year we expected a 3% growth. Unfortunately, we lowered this forecast by 1 pp., to a level of about 2%. The reason for this is the seizure by militants from quasi-republics with the support of Russia of Ukrainian enterprises in the occupied territories, which paid taxes to the Ukrainian budget," said Danyliuk, confirming the macroeconomic forecast of the International Monetary Fund, voiced earlier.
At the same time, he assured that there are no scenarios of the economic collapse as the Ukrainian authorities had managed to stabilize the economy. At the same time, according to many experts, with such a rate of economic growth, Ukraine will need years to reach the level of 2012.
It is worth noting that the Minister of Finance is in no way delusional. According to him, Ukraine will have to make some great efforts to create its own economic miracle. After all, economic growth of 2% is not the growth that people expect and not for what the reforms are being carried out.
Meanwhile, Prime Minister Volodymyr Groysman boasted of his government’s achievements, saying that Ukraine in the next three years could make an economic breakthrough, which citizens will feel.
Pension reform under the supervision of "terribly unprofessional" IMF officials
It was interesting to observe the debate around the issue of whether Ukraine would be able to carry out in time the reforms laid down in the Memorandum signed with the IMF.
Undoubtedly, first of all, we are talking about pension reform. The Minister of Social Police, Andriy Reva, said that Ukraine had already agreed with an IMF mission on 99% of the country’s pension reform, claiming it would take up to one and a half weeks to settle the final technicalities via a video conference. “We are not waiting for a formal approval following the talks with the IMF to move to the next stage. We won’t need much time to prepare the final draft of a bill," the minister said.
"There are several key conditions for obtaining the next disbursement. Pension reform is very important. Without a pension reform, there will be no disbursement," Finance Minister Danyliuk explained.
We can assume that the debate on pension reform is anything but an easy talk, given an earlier comment by Deputy Prime Minister Pavlo Rozenko who publicly accused the head of the IMF mission of being "terribly unprofessional."
"After the words of the ‘expert’ that the ‘basic structure of the pension system has not changed since Soviet times,’ I lost any desire to read all this nonsense to the end," Rozenko wrote on Facebook.
By the way, it is yet to be seen how the Verkhovna Rada will react to the government-offered pension reform. Everyone seems ready to go for another pension increase (which requires an additional $11 bln). But the legislators may harshly oppose any attempt to increase the retirement age.
The Ministry of Economic Development and Trade told UNIAN that the government would not have time to complete another very important reform - it is unlikely that supervisory boards will be established in the 15 largest state companies until the end of June 2017. The delay arises due to the fact that the management bodies must amend the charters of each enterprise where the supervisory councils are being established. The ministry noted that mandatory supervisory boards would be created in state enterprises with the value of assets of more than UAH 2 billion, or with the annual net income exceeding UAH 1.5 billion. For all other enterprises, the decision to create a supervisory board remains to the discretion of the management body and is not meant to become compulsory.
In the past week, two cyclones hit Ukraine hard. One swept through the country’s east where a monthly share of precipitation was recorded over just two days, and from the south where Ukraine was struck by a cyclone called Peter.
Early this week, the temperature dropped to minus 4 degrees at night against the background of the invasion of the Arctic airflows. In six regions of Ukraine, as a result of rain coupled with wet snow and heavy gusts of wind, 152 settlements were de-energized.
According to the chief weather forecaster of the Opogode.ua weather forecasting website, Natalia Didenko, the deterioration of weather conditions and frost threatens the future harvest of fruit. "Short-term chill can be dangerous for the delicate blossom of fruit trees. Longer cooling will be even worse," she wrote on Facebook.
In addition to fruit, grain crops also came under threat. According to the Ministry of Agrarian Policy and Food, as of the beginning of this week, Ukrainian farmers planted 2.6 million hectares of spring grain and leguminous crops, which is about 36% of the projected crop area.
Due to worsening weather conditions and frosts, the agrarians were forced to slow down their spring sowing campaign. According to UkrAgroConsult, agrarians sowed 3.5% less early grains and legumes than on the same date last year. The greatest concern among experts regarded corn sowings. At the moment, two and a half times less corn has been sown than last year.
"Deteriorating weather conditions can lead to the fact that the plans of the Ministry of Agrarian Policy (4.5 million hectares) may not be fulfilled in full," as noted by UkrAgroConsult.
However, later the same week, the agrarian ministry assured that deterioration of weather conditions and freezing temperatures will not significantly affect winter and spring crops. And after the weather stabilizes, the experts will conduct a thorough survey of crops and perennial plantations, to determine possible losses.