Экономические науки/Государственное регулирование экономикой

Гудыма Е.С., Рассолова Л.В.

Донецкий национальный университет экономики и торговли

им. М. Туган- Барановского, Украина

HELPING UKRAINE AVOID A HARD LANDING

A $16.4 billion loan for Ukraine, approved by the IMF`s Executive Board on November 5, will help the government strengthen confidence and restore economic stability after the country became the latest victim of the financial crisis sweeping the global economy.

Until the financial crisis hit the world economy in mid-2008, Ukraine was riding on the coattails of a global economy that had an insatiable demand for steel—a commodity that constitutes 40 percent of the country`s exports, earning $17 billion a year in revenues. The government passed on the gains from high economic and steel exports growth to the population through generous incomes policies.

Together with rising capital inflows, this fueled an unprecedented consumption boom—and a rising current account deficit. By 2008, the economy had overheated, with inflation running at 25-30 percent, wages being hiked by 30-40 percent, and the import bill growing by 50-60 percent.

When the financial crisis hit the world in the summer of 2008, Ukraine was among the many emerging markets to suffer from the fallout. Access to international capital markets was curtailed sharply, currency markets sold off the hryvnia, and the credit rating agencies downgraded the country`s debt.

Ukraine`s government acted proactively by putting together a comprehensive package of policies and requesting IMF support in mid-October. Later that month, a tentative agreement on a program was reached through use of the IMF`s emergency lending procedures. And on November 5, the IMF`s Executive Board gave the agreement its stamp of approval.

According to the poll arranged by PRT in frames of survey “Financial crisis and its influence on Ukraine” about 65 % respondents set forward such opinion.     Within the Round table were presented the poll final results causing deep controversy between representatives of financial structures, business, Mass media and foreign investors.

The poll participants were financial and industry top-management, representatives of affluent business Mass media and state bodies of Ukraine. According to the poll results, more than 60 % people have encountered with crisis influence:  64% respondents notified that their companies have  changed development strategy and 7% of them have done it completely.

Respondents are confident the main reason of crisis beginning is  economic policy pursued by US government. The Ukrainian market participants gave their evaluations on USA crisis  attitude noting it as late but right steps.

Herewith Ukrainian government attitude to crisis have been completely charged. About 13% respondents are self-reliant , next 34%  people noticed on irregular actions of authority, and 37% respondents denied existence of responsible authority in Ukraine.   

The poll shows that the most experts (45%) emphasized low rate of crisis highlighting by Mass media whereas 24% respondents assured in great Mass media contribution in this situation and 7% respondents deny it.

Ukraine`s program is underpinned by policies aimed at restoring economic and financial stability.

The package includes a flexible exchange rate, measures to recapitalize the banking system, and prudent fiscal and incomes policies, which take into account the need for additional social spending to address the impact of the recession on the population.

The government is hoping to achieve three key goals:

• Help the economy adjust to the new economic reality. Allowing the exchange rate to float will act as a shock absorber, and will help the economy recover some of its lost competitiveness. The government is also planning to achieve a balanced budget in 2009, although this goal will be reviewed in light of economic developments. To achieve this, the authorities intend to phase in increases in energy tariffs. They also plan to pursue a balanced incomes policy that protects the population while slowing the rapid increase in prices: the minimum wage and other social transfers will be adjusted in line with projected inflation.

• Restore confidence and financial stability. Recapitalizing viable banks will help shield the economy from a potential credit crunch. Dealing promptly with banks with difficulties will help the rest of the financial sector recover more quickly, and will allow solvent banks to resume lending to households and companies.

• Protecting vulnerable groups in society. Ukraine already has an adequate social safety net, but the economic downturn is bound to put pressure on vulnerable groups. To counter the immediate effects of the crisis, the IMF-backed program envisages an increase in targeted social spending amounting to 0.8 percent of GDP to shield vulnerable groups. The government has indicated it is prepared to expand the social safety net further if necessary.