Экономические науки/2.Внешнеэкономическая деятельность.

Kishinets L.A., Bilan N.V.

Donetsk national university of economics and trade named after

Mykhaylo Tugan- Baranovsky

The consequences of Ukrainian economic crisis

The impact of the global liquidity crisis on Ukraine was even deeper than in most other emerging markets, as indicated by the declines in output discussed above, the large 60% depreciation of the Hryvnia against the US Dollar in 2008, and the drop in the PFTS stock index of more than 74% in 2008 one of the largest declines in the world. The latest period of economic growth was supported by two main factors: first, by cyclically high commodity prices for exports; and second, by high domestic demand fueled by expansionary monetary policies and by banking sector creditfinanced primarily by foreign capital. Demand and consumption were encouraged. However, supply-side policies were neglected. The crisis therefore resulted from a downward correction of unsustainable growth of the real economy and the financial sector. The weaknesses on the supply-side were due to the lack of implementation of structural economic reforms needed to build the basis for sustainable growth, support long-term productivity enhancements and improve the country's international competitiveness. A financial crisis is the final outcome of persistent macroeconomic imbalances. Furthermore, if these imbalances are driven by a narrow set of factors linked to global economic cycles, then the stability of the national economy becomes hostage to developments in the global markets. Evidently, Ukraine was exposed to this particular type of macroeconomic imbalance, which resulted from the global rise in commodity prices and a period of ample liquidity in the global capital markets.

For several years until the fall of 2008, Ukraine enjoyed strong economic performance supported by favorable global conditions and robust domestic demand. Despite the fact that the global financial crisis had been spreading through developed countries for almost a year, the Ukrainian government believed that the country was immune to this international crisis. Indeed, over the first nine months of 2008, Ukraine did not see significant signs of weaknesses. The economy grew at a robust 6.3%, inflation started to decline and public finances were in good shape as the consolidated fiscal budget remained in surplus. Exports grew at a record high rate of 50%, while net FDI inflows stood at $9 billion, fully covering the nine-month current account gap. Finally, the gross international reserves of the National Bank reached a peak of $37 billion at the end of September 2008. However, the economy started to weaken in October 2008. A combination of global risk aversion and falling world commodity demand and prices resulted in an 8% GDP contraction during the last quarter of 2008. This reduced cumulative GDP growth from 6.3% in the first three quarters of the year to just 2.1% by the end of 2008. Industry, trade and construction, which consistently drove economic growth in previous years, reported significant slowdowns, pushing down GDP growth.

The share of problem loans in bank portfolios grew to 10.3 percent by December 11, 2008 and is continuing to grow. Banks have all but stopped issuing loans, and clients have hurried to withdraw deposits. In October 2008 the National Bank of Ukraine introduced a moratorium on withdrawals ahead of schedule.Industrial output in November 2008 tumbled 28.6 percent, following a 19.8 decline in October 2008. In November 2008, the IMF approved a stand-by loan program for Ukraine to the tune of $16.5 billion. A second one worth $1.87 billion might be granted in February 2009.In November 2008, the official unemployment rate increased by 0.4 percent to 2.3 (Previously 1.9% in September), the State Statistics Committee said that as of December 1 (2008), it registered 640,000 unemployed people.

Ukraine's banking system recorded losses of 7 billion hryvnias (UAH) ($909 million) in the first quarter of 2009 compared to a profit of 2.1 billion hyrnvias in the same period a year ago, according to a central bank report of April 22, 2009. On May 18, 2009 Ukraine's State Statistics Committee reported that the deficit of Ukraine's foreign trade in the first quarter of 2009 was estimated at $419.7 million, which was 9 times down on the same period the previous year. On September 17, 2009 the World Bank approved a loan for Ukraine in the amount of $400 million. According to a public opinion poll conducted by FOM-Ukraine in September/October 2009 46.2% of those polled thought that the economic situation in the country would worsen within the next few months, while 35% stated that the economic situation in Ukraine would remain unchanged and 8% thought the situation would improve. Late November 2009 acting vice governor of the National Bank of Ukraine Vasyl Pasichnyk forecasted no mass bankruptcies in the Ukrainian banking sector.

Ukraine's total foreign debt (state and corporate) had reached 93.5% of the 912.563 billion Hryvnya GDP in March 2010; late February 2010 the Ukrainian Finance Ministry had reported that the country's total state debt by early 2010 was to 32.9% of the GDP. Standard & Poor's upgraded Ukraine's rating the same day. March 18, 2010 the National Bank of Ukraine stated the total external debt in Ukraine increased 2.3% to $103.973 billion in 2009, and it considered a 4% GDP growth realistic for 2010 the same day. The Ukrainian economy recovered in the first quarter of 2010 due to stronger-than-expected growth in the global economy, driven primarily by emerging Asia and Latin America, larger social transfers to the population approved in the 2010 budget law and a lower price for imported natural gas (due to the 2010 Ukrainian–Russian Naval Base for Natural Gas treaty).

The Ukrainian economy recovered in the first quarter of 2010. Ukraine's real GDP growth in 2010 was 4.3%, leading to per capita PPP GDP of 6,700 USD. The resumed growth has been helped by growth in neighbouring Russia, which is by far the country's largest trading partner and export market.