Week's balance: Cabinet appoints new customs chief, vows support to businesses amid quarantine, while economy slows further down

13:30, 22.11.2020
4 min.

The Cabinet of Ministers appointed a new head of the State Customs Service and promised businesses support in the face of tougher quarantine restrictions, while the State Statistics Service announced a slowdown in the GDP fall – these are the main economic developments of the outgoing week.

An important event for the national economy and business in the third week of November was the appointment of the new head of the State Customs Service. At its meeting on Wednesday, the government appointed former head of Boryspil Airport, Pavlo Riabikin. He had already been acting chief of the body for the past several months.

As Prime Minister Denys Shmyhal noted, the new head of the State Customs Service, who comes from business, is tasked with reforming the agency.

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"He's from business circles, today's he's already a former head of Boryspil Airport, who has a very good business background, understanding the need to reform the state customs service. I'm sure that in the near future we will see and feel this new reform," Shmyhal said.

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The head of government noted that, judging by the feedback from businesses, there are many issues remaining at customs, therefore, the agency's work requires reform.

By the way, speaking at the annual meeting of the European Business Association, PM named the priorities of the government's work for 2021 – reforming customs, tax, and regulatory bodies in order to facilitate doing business in Ukraine.

Among other priorities of the Cabinet, Shmyhal highlighted further digitization, lower cost of loans for businesses, simplification of connecting businesses to power grids, and acceleration of SOE sales.

Pledges of support to businesses

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The outgoing week brought disappointing news on a higher pace of COVID-19 spread across Ukraine, taking hundreds of lives daily. On Friday, another daily high of new cases was set at over 14,500.

Under these conditions, the government a week earlier introduced new restrictions, called "weekend quarantine." Ukrainian businesses, which survived the tough spring quarantine with heavy losses, reacted to the new restrictive measures with protest rallies across the country.

This forced the Cabinet to take certain steps. Thus, the prime minister said the government had drafted additional measures to support businesses and citizens who have lost part of their income due to the restrictive measures imposed.

"We are resuming support for small entrepreneurs with children, a partial unemployment program, when part of the employee's salary is compensated. Also, there will be 'credit holidays' for businesses within the framework of the '5-7-9' program, recognizing the weekend quarantine as force majeure, which will help businesses in the issues of rent and fulfilling other obligations," Shmyhal said.

President of Ukraine Volodymyr Zelensky has instructed the government to prepare a draft law to ease doing business for small and medium-sized entrepreneurs.

The attention of the authorities to the issues of domestic businesses was attracted including by a rally held outside the Verkhovna Rada on Tuesday where entrepreneurs demanding that the legislators abolish further fiscalization of their businesses and repeal the latest weekend quarantine bans.

But lawmakers have not yet made concessions to protesters. The Rada failed to support the motion to ease weekend quarantine. The vote on a bill to defer until January 1, 2022, the mandatory use of cash registers by entrepreneurs from a simplified taxation group has also failed.

Businessmen have promised to come for another rally on December 4, when lawmakers will try to revisit the bill on postponing further fiscalization of businesses.

Optimistic macro forecast


In the outgoing week, the State Statistics Service released data on the decline in the gross domestic product in the third quarter of 2020 by 3.5% on year. And this despite the fact that in the second quarter of this year, the national economy fell by 11.4%.

Meanwhile, compared to the second quarter of 2020, Ukraine's GDP in the third quarter grew by 8.5%.

Finance Minister Serhiy Marchenko said that by year-end, the forecast for a fall in Ukraine's GDP will correspond to the target set in January.

"This year is difficult in all respects, and the economic dynamics are complicated not only in our country. Our country is in the lower median of the groups of states that have been affected. There is hope that the forecast for a GDP fall will be in line with that we set at the beginning of the year. This will be below 5%. Now there is every reason to expect such dynamics," the minister said.

The head of the Ministry of Finance believes that by the end of the year the target budget indicators will be exceeded, despite the fact that as of May 1, the shortage of revenues stood at over UAH 40 billion. This was made possible "due to the efforts of the State Tax Service in minimizing value added tax evasion schemes."

Pension system reform and weakening hryvnia

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Last week, the Cabinet of Ministers endorsed a bill on amendments to the accumulative pension system, which concern persons working in especially harmful and dangerous conditions.

Prime Minister Denys Shmyhal said that the draft provides for an increase in the size of the unified social contribution by 15% and 7%, respectively, for lists No. 1 and No. 2 of professions associated with particularly difficult working conditions.

"For citizens under 35 years of age who work in especially difficult conditions, a cumulative professional pension system will be introduced. The approximate amount of funds for such a pension system will be from UAH 2 billion to UAH 3 billion per year," said Shmyhal.

According to the Minister of Social Policy Maryna Lazebna, the bill does not change either the rules or the conditions for granting preferential early retirement pensions, only altering the relevant mechanism.

By the end of the outgoing week, the national currency continued its decline, just like a week earlier. Back on Monday, the official exchange rate of the hryvnia to the dollar was at UAH 28.11, but by the weekend the hryvnia had weakened by 15 kopiykas – to UAH 28.26.

Next week, the deputies will continue to work in the committees on the draft 2021 state budget, preparing it for second reading, Ukrainian farmers will complete the harvesting campaign and sowing of winter crops, while the State Statistics Service will publish data on the volume of industrial output over the ten months.

Cold weather with rain and snow will prevail in most regions of the country, while public attention will be riveted on news from the "coronavirus front": can the country withstand the daily incidence rise and prevent the collapse of the healthcare system?

Anna Bredikhina

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