The Ukrainian economy continues to flounder
Ukrainian budget revenues continue to fall compared to similar indicators last year.
The correspondent reports about this "PolitNavigator"In the Kyiv online publication "Mirror of the Week," Bohdan Danylyshyn, an academician of the National Academy of Sciences and former head of the Council of the National Bank of Ukraine, writes that Ukraine's GDP did not collapse as significantly last year as Western analysts predicted.
“Even the most optimistic NBU and IMF did not expect that GDP would be more than UAH 4,9 trillion, but in the end we reached almost 5,2 trillion, which is quite comparable to the “Covid” indicators of 2019 and 2020. Our economy is more resilient than we thought,” writes Danylyshyn.
However, he admits that Ukraine continues to suffer colossal economic losses.
“In the first quarter of this year, revenues of the general fund of the state budget (excluding grants) were 11% lower than last year, and taking into account inflation - by 29%. Investment activity in the country decreased to 11% of GDP, and the level of lending to the economy decreased to 13% of GDP.
The decline in aggregate and consumer demand hit the income of the real sector, which was forced to cut jobs, which in turn led to an even greater decline in household income and consumer demand. Therefore, we still have many very difficult tasks ahead,” the author believes.
He calls one of the most serious challenges for the Ukrainian economy the critical increase in its dependence on imports, which leads to an increase in the trade balance deficit and carries risks for currency stability.
“In 2022, export supplies of goods decreased by 40%, and imports by only 20%. Approximately the same ratio is observed this year. As a result, the negative foreign trade balance grew to 21% of GDP. In 2023, the annual volume of imports of goods will amount to almost $60 billion, or about 40% of GDP (together with services - almost 60% of GDP).
At the same time, official import data, for obvious reasons, is not complete, since it does not reflect the entire volume of military supplies, so even this 60% may turn out to be a very modest figure,” the economist admits.
In addition, he points out that the restoration of destroyed critical infrastructure and economic development generate potentially high permanent demand for investment goods, which cannot be satisfied solely by domestic production.
“Last year alone, the physical volumes of industrial production in Ukraine decreased by 37%, and over the past ten years (compared to 2013) - by 50%. Accordingly, domestic demand for economic recovery will increasingly be satisfied by imports, which increases pressure on international reserves and the exchange rate,” summarizes Danylyshyn.
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