Miroshnik S.

PhD Zhukova O.

PhD Petrachkova O.

Donetsk StateUniversity of Maagement

Scenario forecast for the development of Ukrainian economy in 2010

Increased uncertainty in the global economy and commodity markets has exacerbated the need for the scenario forecasting economic trends. Studying Russia Institute and Ukrainian business magazine "Expert" developed a scenario macroeconomic forecast for Ukraine for 2010. Last week this forecast was directed to the Ministry of Economy of Ukraine. It will be incorporated into the consensus forecast, regularly made on the basis of forecasts of leading analytical centers in the country engaged in macroeconomic forecasting.

Our forecast includes two scenarios: baseline and pessimistic. The base forecast assumes the stabilization of world prices for resources in 2010 (average annual price of Urals oil at 65 dollars per barrel) and a moderate devaluation of hryvnia against the U.S. dollar (the average exchange rate for UAH 6.74 per U.S. dollar). The pessimistic forecast is based on expectations of further getting worse of world s conjuncture (annual average oil price of 40 dollars per barrel, proportionally reduced prices for ferrous metals and chemical products). At this conjuncture we expect a sharp devaluation of the hryvnia exchange rate (annual average rate of exchange at 8.50 USD per U.S. dollar to the achievement rate of 10 UAH per U.S. dollar in the second half 2010).

According to the baseline scenario, in 2010, Ukraine's real GDP will grow by 2%. A key driver of economic growth will be domestic consumption, increased by 5%. Growth in real disposable income slowed, but will remain relatively high by international standards: they will increase by 6%. The unemployment rate will rise to 7.5% of the population (according to ILO methodology). Investment growth will be 4%. The slowdown in economic activity will contribute to weakening of inflationary pressures. In 2010, the consumer price index (CPI) will rise by 14.5%, the producer price index (PPI) by 13%. Compared with this year the pace of growth of foreign trade dramatically slow: will exports of goods and services in value terms will increase by 5%, imports - by 8%. In this case, the imbalance of foreign economic operations will be intensified: the current account deficit of balance of payments will reach 10.3% of GDP.

According to the pessimistic scenario, in 2010, Ukraine's real GDP will fall by 3%. A recession will affect all sectors of the economy. The consumption will decrease by 5.8%. The unemployment rate will rise sharply: up to 9-12%. The investments will decrease greatly - 15%. Sharp devaluation of the hryvnia against the U.S. dollar will cause the acceleration of consumer inflation in comparison to the baseline scenario: CPI will grow by 18%. However, the economic downturn will heighten deflationary pressure on producer prices: CPI will increase by only 9.5%. The landslide devaluation of the hryvnia will cause a rapid straightening of the external economic imbalances. In 2010, export of goods and services will decrease by 14.2% and import - by 20.9%. The current account deficit of balance of payments will be reduced to 2.7% of GDP.

In both scenarios, it becomes apparent that the counter-cyclical policy aimed at stimulating economic growth through domestic is to become the priority. Among the main priorities of state economic policy combat inflation (due to falling world prices) and trade deficit (due to the in devaluation of national currency) should be removed. These priorities have been relevant this spring. In contrast, the task is to stimulate business activity and job creation, including the state budget. To pass the crisis period with a balanced budget will not succeed.

Literature:

1. Floren Franz Jos., Wirtschaftspolitik im vereinten Deutschland, Paderborn, 1999

2. Bach H.-U., Der Arbeitsmarkt in Deutschland, Berlin, 2002

3. Franz Wolfgang, Der Arbeitsmarkt: Eine oekonomische Analyse, Manheim, 1993

4. Ferguson RH Unemployment: Its Scope, and Effect on Poverty, NW 2000

5. Ovchinnikov, GP, microeconomics, macroeconomics, St. Petersburg., 1997

6. www.ifo.de