No matter who wins the presidential election on April 21, one thing is certain – they will lead a country with a fragile economy. This was clearly evident in the most recent World Bank Financial Inclusion report for Spring 2019.
Ukraine’s massive economic challenge is this: Pay off $15 billion of public debt by the end of the year, fight off a large and aggressive neighbor to its east while trying to attract investments from the West, privatize or simply liquidate thousands of state-owned enterprises, de-monopolize industries, fight corruption, all while plugging its brain drain. The challenge is intensifying as economic growth slows down across Europe and Central Asia. Developing economies in the region as a whole saw only 3.1 percent growth last year, and this will decline to just 2.1 percent this year, according to the report.
“The growth outlook depends critically on sustaining the reform momentum to support investment and mobilizing adequate financing,” the World Bank wrote. “In 2019, growth (in Ukraine) is projected at 2.7 percent as investment remains constrained by difficult external conditions, election-related uncertainties, and the resulting high cost of external borrowing.”
Maintaining the reform drive will allow the country to stay ahead of the curve with 4 percent growth. But if it delays reforms, growth could fall below 2 percent.
So Ukraine can’t afford to make any more mistakes, and needs to catalyze its economic reforms to compete with others in the region. There is no excuse for delay: each step back exacerbates poverty and quite literally costs lives. It’s the moral responsibility of each Ukrainian to fight corruption, to hold those in power responsible, and to create a fair competitive environment.
Priority number one should be to establish a truly independent judicial system, sending investors the message that Ukraine is a fair market where their intellectual property can be protected. Second, Ukraine needs to establish a sound land market, which would allow private ownership of agricultural land, and bring in billions of dollars into the economy, arguably faster than any other reform.
The country’s business environment has improved greatly since the 2014 EuroMaidan Revolution. It has risen by 40 positions since 2013 in the World Bank’s global ease of doing business index. Most importantly, Ukraine’s economy is healthier, having been rid of toxic financial institutions, and having gone from being a Russia-dependent economy to a global one, adopting European Union standards after signing its political-economic association agreement with the union. Experts say these changes will bear economic fruit in a couple of years.
Still, the shock of these difficult reforms has been intense. Many Ukrainians have again lost trust in the banking system, which makes lending difficult. The central bank said in July that 37 percent of adult Ukrainians have no bank accounts, either because they have no money, or simply because they don’t trust the banks.
But even then, about 63 percent of Ukrainians had bank accounts in 2017, up from 41 percent in 2011. And Ukraine was one of the countries that saw “significant growth” in the use of digital payments, according to the report. And according to the World Bank, Ukraine remains the largest recipient of remittances in Europe and Central Asia, with $14.4 billion coming to the country from Ukrainians working abroad.
And even though there are many other state officials and lawmakers that are responsible for navigating the economic development of the country through tough times, Ukraine’s next president will have to prioritize building economic muscle – therefore attracting investors – as one of the top goals.
