The IMF identified the key problems of the Ukrainian economy | ZI.ua
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IMF mentioned the main problems of the Ukrainian economy

29 сентября 2019, 19:17 | Официально
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Photo: UNIAN
Photo: UNIAN

During a visit to Kyiv, the IMF mission discussed prospects and challenges for the Ukrainian economy during discussions on a new cooperation program.

It is reported by the FinClub.

“After the deep economic crisis of 2014-15, the Ukrainian government resumed macroeconomic stability, and the economy began to grow again. The economic growth rate is 2.5-3.5%,” – the IMF said in a statement.

They noted that sound fiscal and monetary policy and exchange rate flexibility led to a sharp decrease in Ukraine’s external and internal imbalances.

“The total budget deficit has been limited to just over 2% of GDP over the past two years, and it is expected that this year it will remain at the same level,” – the fund said.

The quasi-fiscal deficit of the energy sector has also been eliminated, which is a major achievement. Moreover, the current account deficit narrowed to 3–3.5% of GDP, and reserves recovered to more than $ 20 billion.

At the same time, the IMF emphasizes that the growth rate remains "too low to significantly reduce the income gap with Ukraine’s neighbors."

"GDP per capita (in PPP terms) in Ukraine is still very low - only 20% of the EU average, which is the second lowest level among all countries of Central and Eastern Europe," – the statement said.

The fund notes that the growth of the economy is constrained by a weak business environment - with deficiencies in the legal framework, widespread corruption and significant parts of the economy, which are dominated by inefficient state-owned enterprises or oligarchs that restrain competition and investment.

A comparative analysis in a regional context shows that the greatest difference in the development of reforms between Ukraine and neighboring countries lies in the quality of the legal institutional system.

Also, due to the poor business environment, foreign direct investment in Ukraine was much lower than in other countries of the region.

This lack of investment has limited productivity growth (labor productivity is less than 10% of average productivity in the EU), job creation in the private sector and higher living standards, despite the highly skilled workforce in Ukraine. As a result, many workers are searching for work abroad.

According to the IMF, economic policy should continue to focus on maintaining macroeconomic stability while creating the conditions for accelerating economic growth.

The IMF added that Ukraine needs to pursue a sound fiscal policy to ensure an acceptable level of debt, to increase the efficiency and effectiveness of government spending, in particular in the field of health and education, as well as in the field of supporting vulnerable groups of the population through a clearly targeted social security system.

In addition, a prudent monetary policy is needed to slow inflation and accumulate reserves. It is also necessary to minimize the cost of bank liquidation for taxpayers, the report said.

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