REUTERS
An 8.5% decline in the GDP for a poor country, which must show growth at 5% to tackle poverty, is an enormous shock.
Ukrainian President Volodymyr Zelensky's adviser, member of the Supervisory Board at the Bleyzer Foundation Oleh Ustenko says Ukraine's GDP may drop at least by 5% due to the quarantine introduced by the government over the coronavirus pandemic until the end of April and, possibly, including early May.
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"To be sure about the consequences, you need to know how long the quarantine will last and how quickly the world will cope with the pandemic. In my understanding, if we are talking about a period of at least until the end of this month, with possible prolongation until May partly, we will really show an economic decline. There will be no 3.5% growth [in the GDP] the government had originally hoped for. The fall will be about 5% under the base-case scenario. So, we expect an 8.5% gap (3.5% growth we will fail to achieve, plus a fall projected at 5%)," he said in an interview with Gorshenin Institute on April 9.
According to Ustenko, an 8.5% decline in the GDP for a poor country, which must show growth at 5% to tackle poverty, is an enormous shock. At the same time, he believes that in the current situation, the priority is health of the population, then go economic issues.
"First of all, the health of the population is of paramount importance. It is the coronavirus [pandemic] rather than the economic crisis as a whole that needs to be passed with minimal losses. We need to pass it as fast as possible with effective barriers that are now being built to prevent the active movement of people. In general, it is required to protect the population and human health as much as possible. The economy is already getting closer to resolving this problem with the health of the nation. To this end, changes are being made to the budget to channel funds into more vital sectors," he added.
The expert believes that, first, it is required to protect Ukrainian citizens, as many have lost their jobs. However, their spending remains high. So, the government should provide them with quick and active social support. In addition, assistance should be provided to vulnerable groups of people who already have the lowest possible income. Therefore, the president came up with an initiative to give a lump sum worth UAH 1,000 (US$37) to each pensioner whose retirement benefit is below UAH 5,000 (US$183).
"Simultaneously, assistance should be offered to all companies that are turned out to be in crisis. These are mainly companies working in the service sector. They need to be supported if they are in crisis. The government may introduce tax holidays and give up fines and penalties, while the National Bank may announce loan repayment holidays and debt restructuring," the expert summed up.