Last week, Denys Shmyhal's government marked their first 100 days in office. On this occasion, PM held a large press conference where a journalist directly asked him what he intends to do "if things start falling apart in the fall," that is, if the global economic crisis deepens, as some experts predict.
Shmyhal called such forecasts "a typical boogeyman story about the end of the world" and said that the government expects the resumption of GDP growth from Q3.
And although he said that now no government in the world is able to predict anything more than three months ahead, he cited the encouraging macro outlook of the Ministry of Economy, the IMF, the World Bank, and foreign think tanks as proof of his suggestions.
The government simply has no backup plan if something goes wrong
He also emphasized that the Cabinet " sees no critical threats that could arise in August-October" or any "surprises" that could collapse the economy and lead to disaster.
From such a bit of self-confident speech, the conclusion suggests that the government simply has no backup plan if something goes wrong.
Or maybe there is one, but Shmhgal decided not to sow unnecessary panic.
Considering how the Cabinet of Ministers reacted to the coronacrisis challenges, the first option looks more plausible.
It is entirely possible that after receiving the first tranche of the new IMF SBA and tied loans from other international lenders, the government relaxed a bit and decided that the market itself would gradually find its way out of the quarantine ditch.
Needless to say, such shortsightedness is threatening because Ukraine underwent the previous crises almost worse than everyone else in the world. And the March statement by prime minister that our country is in crisis that's much stronger than that of 2008 for some reason doesn't add confidence. And the three quarantine months only confirm these fears.
Apparently, the Cabinet's top priority is the approval by the MPs of their action program, without which the ministers will not have annual immunity from dismissal.
The parliament itself has not yet decided whether approving the Cabinet program
The first version of the program, following merciless criticism within the walls of the Verkhovna Rada, was sent for revision. Therefore, the document was urgently rewritten and, at the end of last week, once again submitted for consideration by MPs.
It seems that the parliament itself has not yet decided whether it is worth approving the Cabinet program so they decided to develop their own vision of a backup plan for saving the economy, since the ministers are not up to it. This was confirmed at the meeting of the working group on the elaboration of proposals for the economic rescue of the country, which took place last week.
The ideas that were voiced there so far can hardly be called popular among top officials, but the very trend is already an important signal.
Dmytro Natalukha, who heads the Verkhovna Rada Committee on Economic Development, pointed out that the pandemic actually issued many states carte blanche to choose their own ways to respond to the crisis, and many took unprecedented measures. As international examples, he cited nationalization of certain industries and the transition to a model of state capitalism, sovereignitizing the economy, and resorting to enormous money emission.
By the way, speaking of money printing... Head of the subcommittee on the development of fair competition at the parliamentary committee on economic development, Liudmyla Buimister, voiced an idea seen as rather seditious by the incumbent leaders of the Cabinet and NBU.
It's about printing about UAH 300 billion, which is 10% of the gross domestic product. She proposed to evenly divide this money into three subprograms of economic incentives. The first is handing out UAH 3,000 to each resident. The second one implies free and unconditional loans to support retail chains, small and medium-sized businesses, so that they are able to pay salaries and, thus, save jobs. The third one is about investment in building infrastructure and restoring the electricity and energy sectors.
Ukraine lives on political logic, and now local elections, scheduled for October, are already looming on the horizon
I wonder what inflation and the hryvnia rate will be like after such "innovations" as pouring money into the economy are implemented.
So far, the main thing is not how these proposals could be perceived by international creditors but the actual effect of such actions if they are implemented. It is important that these ideas are being voiced, and the voices promoting them are rather prominent.
And let's imagine that developments don't go according to the Cabinet's optimistic scenario and that the economy will face challenges much more serious than those the country faced this spring. Can people hope for a swift government response?
It is also important to remember that Ukraine lives on political logic, and now local elections, scheduled for October, are already looming on the horizon. Since virtually all key decisions in the country are made by president, if the Cabinet lacks Plan B, the said proposals from parliamentarians, which will obviously appeal to many voters, may well be put on Zelensky's desk.
Dmytro Shvarts
