KYIV, November 16 – President Leonid Kuchma used a state of the nation speech on Thursday to take a sober look at Ukraine’s struggling economy and to pledge faster and better reforms.
Kuchma, first elected in 1994, has largely overseen a period of economic decline for the country, and his opponents criticize him for frequent changes in his statements about economic policy.
“In the last 10 years Ukraine’s economic potential has more than halved. Standards of living have fallen even further. The gap between poor and rich is growing at a threatening pace,” he said in his speech at a technical university.
“We need to work out a strategy to stabilize the economy and generate further growth,” he said. “This year results are pretty optimistic, proving this task is absolutely realistic.”
Ukraine hopes to achieve its first economic growth after almost a decade of contraction. Gross domestic product (GDP) is predicted to rise by 3.5 percent in 2000 after a 0.4 percent fall in 1999.
Official data show GDP grew by 5.1 percent in the first 10 months of the year compared to the same period a year ago.
LAGGING BEHIND NEIGHBOURS
Kuchma said Ukraine was lagging considerably behind its neighbors in Eastern and Central Europe and said government’s pivotal task was to boost GDP per capita, and catch up with countries like Poland or the Czech Republic.
GDP in Ukraine totaled $23 billion in 1999, whereas Poland, which has about the same population, recorded a GDP of $146 billion in the same year.
“To achieve it we need at least six to seven percent GDP growth and conditions for this should be created in 2001,” said Kuchma. “A 2001 state budget should form a potential for future economic growth.”
Under a draft 2001 budget, which was submitted to parliament for a second reading on Thursday, GDP is expected to grow by four percent.
Kuchma acknowledged that cooperation with the International Monetary Fund was vital for Ukraine, which froze a three-year $2.6 billion lending program to Ukraine last year over slow reforms.
The president said Ukraine hoped to unlock lending and counted on fresh IMF funds to cover old borrowings from the Fund.
“If we succeed in these talks our economy will be able to recover without new borrowings and the state could free itself from outside control on its policies which are not always proper,” Kuchma said.
Kuchma also said he would focus on fighting Ukraine’s flourishing shadow economy, which is estimated to equal the size of the official economy.
The state would increase its support to domestic investors and producers, he said, calling for a stronger banking system and more commercial loans.
He also said the government and the central bank should change their financial policies to strengthen and develop the country’s banking system.
