Ukraine’s economy under political crisis conditions 2003–2004 forecast International Centre for Policy Studies


НазваUkraine’s economy under political crisis conditions 2003–2004 forecast International Centre for Policy Studies
Дата конвертації16.04.2013
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ТипПрезентации


Ukraine’s economy under political crisis conditions 2003–2004 forecast

  • International Centre for Policy Studies

  • Seminar-presentation for clients

  • 7 November 2002


Presentation plan

  • About the International Centre for Policy Studies

  • ICPS forecast for 2003–2004

  • ICPS forecast assumptions for 2003–2004

  • Impact on different sectors of the economy

  • Impact on financial stability

  • Risks to the ICPS forecast

  • ICPS proposals for business clients



About the International Centre for Policy Studies



What is ICPS?

  • The International Centre for Policy Studies is an independent research organisation, founded by the Open Society Institute in 1994

  • Our mission is to promote public policy concepts and implement procedures for public policy formulation in Ukraine

  • We provide the following services:

    • public policy research
    • training for participants in the policymaking process
    • facilitating public dialogue


What is Quarterly Predictions?

  • Analysis of development trends in the Ukrainian economy

  • Overview of quarterly events and their evaluation

  • Quarterly updates of the forecast for economic developments in Ukraine



What do we endeavour to deliver to our readers?

  • Understanding of development patterns of the Ukrainian economy at the macro level

  • Vision of the future dynamic of economic processes in Ukraine

  • Impact evaluation of governmental decisions on the dynamic of Ukraine’s economy

  • Evaluation of changes in the country’s economic activities — GDP forecast



ICPS forecast strengths

  • ICPS has been regularly generating an economic development forecast since September 1997

  • Quarterly forecast updates allow to keep track of new information and trend changes

  • Analysis of all available information

  • Independence



ICPS forecast for 2003–2004

  • Tetiana SYTNYK



ICPS dampens its vision of economic development for 2002–2004

  • In 2002, Ukraine’s GDP will improve by 4.3%

  • 2003 will see growth decelerating to 3.5%…

  • … while in 2004 it will bounce back to 4%



Real GDP index, seasonally adjusted, Q1’95=100



Comparison of the previous forecast and its updated present version



ICPS forecast assumptions for 2003–2004

  • Tetiana SYTNYK



ICPS downgraded its forecast following a review of assumptions

  • Worsened assumptions about public policy developments:

    • short-term interests will prevail over any long-term vision of public policy
    • government decisions will be impossible to approve
  • Forced redistribution of property in the course of political struggles

  • Downgraded forecast for GDP of Ukraine’s trading partners



Reasons for a less optimistic view of Ukrainian government policy

  • Efforts of individuals involved in approving decisions are squandered in political struggles, instead of devoting them to national policy development

  • Divergence of opinions regarding political issues dominate over any agreement of opinions regarding economic policy

  • Business representatives are directly involved in the political struggle and cannot influence this choice

  • The old command-administrative methods of decision making do not work under conditions of political competition

  • Public trust in the government is dwindling



Impact on the dynamic of the Ukrainian economy

  • Capital losses:

  • Higher risks to domestic investments

  • Capital outflow from Ukraine and insignificant volumes of foreign direct investments coming in

  • Increased costs of private and public external loans

  • Consumer pessimism:

  • Worsened social expectations and consumer confidence

  • Decreased household incomes and decelerated consumption



Forced redistribution of property hinders investment

  • Political interests and big business are juxtaposed

  • Immaturity of the stock market and lack of relevant legislation hamper a civilised transfer of property

  • Forced redistribution of property leaves no opportunity for investors to recoup invested money



GDP, consumption and investment annual % change



Consumer confidence index



GDP of Ukraine’s trading partners and export growth annual % change



Impact on different sectors of the economy

  • Tetiana SYTNYK



Downgraded forecast will have a varying impact on different sectors

  • The highest risks come from sectors where public property dominates and where hefty cash flows are concentrated:

    • electricity, gas, and water production and supply
    • pipeline and railway transport
    • communications
  • Sectors producing investment goods and services, specifically, machine-building and construction, will incur losses

  • Highly competitive sectors, like trade and automobile transport, will be less affected



Competition % of respondents



Possibilities of mitigating investment risks

  • Trouble-free market entry and exit reduce investment risks

  • Highly competitive markets and those with a measurable share of private enterprises are more attractive



Ownership % of total number of enterprises



Forecast across sectors real % change



Impact on financial stability

  • Andrew BLINOV



Exchange rate UAH/USD



Depreciation will resume

  • In 2002, the nominal UAH/USD exchange rate has not undergone any noticeable changes, due to the following:

    • a higher than forecasted positive balance of foreign trade
    • a high rate of transfer receipts
  • The worsened balance of payments will cause a slow nominal depreciation: by the end of 2003, the exchange rate will attain 5.55 UAH/USD, while in 2004 it will reach 5.69 UAH/USD

  • Real effective exchange rate will be kept at a stable level



Current account balance and trade balance of goods and services millions USD



Trade balance will shrink at a slow pace

  • In 2003–2004, the foreign trade balance will be shrinking, although slower than we had forecasted earlier:

  • goods exports will grow at a slower pace, due to the more sluggish GDP growth of Ukraine’s trading partners

  • goods imports will climb up less briskly, in view of decreased consumption and investment; the growth will be more vigorously than for exports

  • services imports will enlarge in the wake of capital outflows



Gross reserves accumulation and payments on the state debt millions USD



Money market and lending activities

  • Remonetisation will persist: in 2003–2004, broad money [M3] indicators will advance to 30%



Growth of monetary aggregates % y-o-y



Money market and lending activities

  • Remonetisation will persist: in 2003–2004, broad money [M3] indicators will advance to 30%





Money market and lending activities

  • Remonetisation will persist: in 2003–2004, broad money [M3] indicators will advance to 30%

  • Excessive liquidity is forcing banks to cut interest rates on loans, with deposit interest rates being simultaneously reduced

  • Lending volumes will increase more sluggishly, because of diminished investments and capital outflows



Deflation will cease

  • We forecast that consumer prices will pick up in 2003–2004, by 6% and 5.5%, respectively

  • Price growth factors:

    • moderate increases in tariffs for electricity and public utilities
    • pressure from growing producer prices




Risks to the ICPS forecast

  • Andrew BLINOV



The situation will be markedly worse than our forecast in the event of:



How can economic development be promoted?

  • Political forces should separate their political struggles and public policy discussions

  • Political parties should declare their vision of public policy and compete to improve the quality of public policy

  • Government analysts who are not involved in the political struggle should prepare justifications of decision options and impact assessments

  • Comprehension of implications will make politicians responsible for opting for certain decision options





ICPS suggests:

  • “Economic Research” publications package

  • Custom research and other services for business

  • New products on offer:

    • Research on Ukraine’s middle class
    • Regional trends
  • Information on other ICPS services is available on our website www.icps.kiev.ua



“Economic Research” publications package

  • ICPS can assist you to better understand the economic situation in Ukraine, and thus to make more effective decisions.

  • The “Economic Research” publications package includes:

  • Analysis and forecasting with regard to the Ukrainian economy

  • Data from the ongoing consumer confidence survey

  • Key economic statistics

  • Analysis of the effects of changes in legislation on doing business in Ukraine



Quarterly Predictions (a review and forecast of the development of the Ukrainian economy, published quarterly since 1997)

  • Quarterly Predictions (a review and forecast of the development of the Ukrainian economy, published quarterly since 1997)

  • Consumer Confidence (quarterly survey of the economic expectations of Ukrainian households)

  • Economic Statistics (monthly table of statistical data important in doing business in Ukraine)

  • New Economic Legislation (annual analysis of the effect of legislative changes on doing business in Ukraine)

  • Policy Studies (research papers on the most important issues of national policy)



Annual subscription conditions for the “Economic Research” publications package from ICPS:

  • Annual subscription conditions for the “Economic Research” publications package from ICPS:

  • If subscription is taken by 31 December 2002, clients qualify for the special discount price of 1,995 hryvnias + the first issue of Regional Trends publication for free

  • After 1 January 2003 the subscription price will be 2,495 hryvnias

  • Long-term subscriptions qualify for substantial discounts:

  • for three years, pay 5,195 hryvnias (save 30%)

  • for two years, pay 3,995 hryvnias (save 20%)

  • Subscription applications are available and may be submitted via the ICPS website www.icps.kiev.ua



Custom services for business

  • ICPS research commissioned by business clients focuses on alternatives that touch on public policy or strategic business decisions.

  • We use a variety of research tools, including: policy analysis, economic analysis and modelling, sociological surveys, strategic planning and communications.

  • Advantages of research done for business by ICPS:

  • independent conclusions

  • high-quality analysis

  • partnerships to deliver top-notch quality



Key offerings:

  • Analysis of policy alternatives and development of recommendations regarding government policy in a given sector

  • Analysis and forecasting for development in individual markets

  • Long-term forecasting of macroeconomic indicators and regional development indicators

  • Economic impact analysis, and particularly impact of investment projects

  • Analytical support for strategic planning process

  • Consumer behaviour analysis



Examples of commissioned research:

  • “Analytical Support to the Privatisation of the Ukrtelecom: Development of Regulatory Policy”

  • “Impact Assessment of Western NIS Enterprise Fund Investments on the Economies of Ukraine and Moldova”

  • “Analysis of the Telecoms Market in Ukraine” (for Kyivstar)

  • “Impact Analysis of Introducing a Mixed System of Excise Taxation of Tobacco Products” (JTI)

  • “Developing Policy for Mass Media Support in Ukraine” (Open Society Institute)



Research on Ukraine’s middle class

  • Why study the middle class?

  • It accounts for the lion’s share of incomes in Ukraine

  • It is the most active in various markets (labour, goods, services)

  • Its behaviour is the most logical/predictable

  • Due to its unique characteristics, analysis and forecasting of middle-class behaviour are important for business planning

  • GOAL: to analyse the effect of changes in the size and behaviour of the middle class on market development



Project details:

  • Jointly implemented with the GfK-USM company and the New Marketing journal

  • Methodology:

  • sociological surveys

    • identifying the middle class
    • in-depth interviews with representatives
  • data analysis and econometric modelling

  • international comparisons

  • FOR further information, please visit http://www.icps.kiev.ua/projects/ukr/middle_class



Research results:

  • Annual report (first one to be issued in March 2003):

  • Analysis and forecast regarding the quantitative and qualitative evolution of Ukraine’s middle class

  • Forecast regarding behaviour in particular markets

  • Who is eligible to receive the report: Join the consortium of clients commissioning the research

  • Additional possibilities: To commission detailed analysis of middle-class consumer behaviour in a given market

  • Contact persons: Yevhenia Yehorova (marketing@icps.kiev.ua), Maksym Mashliakivsky



Regional trends

  • Research on the development of regional economies is important for doing business and for making decisions on investment projects in Ukraine’s regions

  • Research includes the following components:

  • analysis and forecasting of main development trends in the regions of Ukraine

  • assessment of regional economic policy

  • rating of Ukraine’s regions with respect to their potential



Research includes the following components:

  • Regional production

  • Labour markets

  • Households

  • Budgets

  • Foreign trade

  • Prices



Research product:

  • The analytical publication Regional Trends will be issued every six months, starting in December 2002. It is a separate product from the “Economic Research” publications package.

  • The first issue of the regular publication will be sent free-of-charge.

  • Subsequently, annual subscriptions will cost:

  • For subscribers to the ICPS regular research package — 1,445 hryvnias

  • For other clients — 1,995 hryvnias



Thank you for your attention!



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