The Russian bailout of Ukraine has not only lifted President Viktor Yanukovych’s spirits, but that of the Ukrainian government's as well.
Before the
Dec. 17 agreement, in which Russian President Vladimir Putin promised to buy up
$15 billion in Ukrainian debt and cut natural gas import prices by one third,
Ukraine’s government had predicted only 1.8 percent gross domestic product
growth in 2014.
After the
deal, however, the government revised its projection upwards – to 3 percent
growth.
The
forecast appears in the 2014 state budget draft law that the government gave to
Ukrainian parliamentarians on Dec. 19, ending a months-long mystery.
Overall,
the gross domestic product is supposed to reach $206 billion, according to the
new projections.
However,
economists already consider this forecast as too rosy. Ukraine’s
economy has been in recession for five quarters already.
‘I expect
in 2013, the GDP will decline to $162.5 billion from $176 billion in 2012,”
Ukrsotsbank economist Tantely Ratuvuhery told the Kyiv Post.
If true, it
would not be the first time that Ukraine’s government has adopted a knowingly
unrealistic and unachievable state budget law. For the year 2013, it assumed
GDP will grow by 3.4 percent, but instead the figures will show the nation
suffered a recession this year.
The state remains
short of cash, leading to unpaid wages and other planned public spending. There was a need for an extra Hr 4.5 billion to pay salaries in the public
sector, but the figure is lower now because money was transferred from other parts of the budget, according to state financial inspectors.
However,
besides paying public workers, Prime Minister Mykola Azarov also said he will
increase social expenditures – including pensions and various forms of
subsidies. Such government largesse often comes ahead of elections and Ukraine’s
presidential election is scheduled for early 2015. President Victor Yanukovych’s
support comes from many people who are dependent on government spending.
The nation
of 45 million has 13.2 million retirees and more than 3 million public sector
employees.
Whether
increased public spending will be enough to win support for Yanukovych’s
reelection bid remains a big question.
His
popularity was not high even before Nov. 21, when he scuttled an association
agreement with the European Union, capped by a political disastrous Eastern
Partnership Summit in Vilnius, Lithuania for Yanukovych.
His support
since then has plummeted as hundreds of thousands of Ukrainians have taken to
the streets over the last month to protest his foreign policy U-turn from the
West to Russia.
The
infusion of Russian cash, however, may be enough for Yanukovych to smooth over
short-term economic problems, including payments to citizens.
There could
be some moderate changes in the state budget draft law yet.
The Ukrainian
government was expected to pass the budget in the Ukrainian parliament on Dec.
19, but failed after the ruling Party of Regions failed to adopt the law after
differences surfaced. Lawmakers are going to take up the budget issue again in
January.
Kyiv Post staff writer Darina Marchak can be reached at [email protected].
