Ukrainian Recovery May Take at Least Two Years, Yushchenko Says
Ukraine’s economy, the most damaged in Europe by the global crisis, may take two years to recover even if the Cabinet succeeds in trimming the deficit, President Viktor Yushchenko said.
The former Soviet republic’s economy shrank an annual 20.3 percent in the first quarter after growing 6.3 percent in the same period just a year earlier. It may contract as much as 12 percent this year, according to the Economy Ministry, the worst slump since 1995.
The country is seeking to meet terms to receive a fourth installment of a $16.4 billion loan from the International Monetary Fund. Yushchenko said the draft budget deficit for next year would be equivalent to as much as 12 percent of gross domestic product and warned the government of Prime Minister Yulia Timoshenko, who will stand against him in January elections, is succumbing to “populist” spending.
“If we talk about the probability of restoring the economic situation to the way it was a year ago or a year and a half, then it is clear now that without reform it would take many years,” Yushchenko said in an interview in his office in Kiev yesterday. “With profound and fair reforms, it would take about two years.”
The economic malaise can be attributed to plunging worldwide demand for steel and raw materials, a $12 billion bond repayment this year and an “unrealistic” budget for the current year, he said cheapest personal loan rates. The chief blame lies with Timoshenko and the parliamentary majority parties, who ignored his warnings over the past years, he said.
Industry also was squeezed by a government decision to drop a plan to refund value-added taxes to exporters, starving them of cash to increase efficiency, he said.
Industrial production sank an annual 23.3 percent in August, after falling 26.7 percent in the previous month.
“If we take a look at the situation we have today, then the downfall of industry is really tremendous,” Yushchenko said.
In the interview, Yushchenko also said the burgeoning budget deficit could further weaken the hryvnia and accelerate inflation, already the fastest in Europe.
An approved deficit for state-run NAK Naftogaz Ukrainy, the pipeline operator and energy company, is among “unskilled” decisions made by the government and a reason for the widening deficit, the president said.
The government approved a pricing system with Russia that left Ukraine receiving less for gas shipments than any other European country,
“That is a road to nowhere,” Yushchenko said. “And the only way to overcome it is to make profound reforms.”
Filed under: legal by Finance Boss