Coronavirus VS Ukraine: battle against economic “complications”
Analysts for Bank of America estimated that panic over the pandemic Covid-19 took the world market for $9 trillion. In general, in 2020, the planet risks losing about 3% of global GDP, which in monetary terms equals $2.7 trillion. How much has already lost Ukraine and how tightly we should tighten our belts? We will consider in more detail in this article.
Assessing the current situation, it remains only to sigh about the government’s plans for this year: both global privatization of state-owned enterprises and land reform are now postponed indefinitely. Small and large privatization had to replenish the treasury by UAH 12 billion. But today, economic instability provokes potential and existing investors to revise the decision to acquire state assets of Ukraine.
It is not yet clear how long the officials will continue to milk a dying cow, but without taking measures that are really able to support business, the economy will not last long. The options for such support may be reducing the tax burden and stimulating import substitution.
It should be noted that last week the first attempts to provide emergency support to businesses were made. The Verkhovna Rada temporarily abolished the obligation to pay the unified social contribution for individual entrepreneurs, and enterprises were exempted from tax on commercial real estate and land. Following this, the preparation of the second package of draft laws was announced. New measures are seen more significant and, if properly implemented, can become a saving straw for business.
In addition, the government shared plans to establish a fund with a budget of up to UAH 200 billion, which will be aimed at eliminating the consequences of the crisis and quarantine. Also legislators convened analysts who will solve new economic puzzles.
Obviously, Ukraine cannot avoid the fall of the economy. Like China has not avoided it, and the United States will not be able to come out without losses, therefore, one can only pray for the fragile economy of Ukraine.
Economic complications at best will drag on for six months. Even if Ukraine does not decide on a new extension of quarantine and restrictions will be removed on April 25, the resumption of demand, supply chains and logistics will continue until mid-summer. Whatever the case, the Ukrainian economy, one of the most dependent on logistics, receipts from migrants and foreign financial markets, will be under strong pressure by July.
It can be assumed that the most intense situation now at landowners. Spring sowing works are under the threat of failure, because in addition to technology, this process requires the participation of a large number of personnel for repair work, control of sowing and fuel and lubricants, plant protection process. If these works are not carried out on time and in sufficient quantities, in autumn the government will have to solve the food problem of the population.
According to experts of the Ukrainian Institute for the Future, today we have two scenarios for tightening quarantine measures. The first is designed for 2 months, the second predicts a whole year of self-isolation of the population. Now we are guided by the first scenario. According to this scenario, we can expect a drop in GDP by 5%. The second scenario will collapse our GDP by 10%. The fall of the economy will lead to the growth of the U.S. dollar and by the end of 2020 it will reach the mark of 30 UAH/$.
It turns out that the coronavirus crisis in any case will hit our economy. The only question is whether we lose five percent or ten. It is useless to make forecasts for the probability of implementing the first or second scenario, because objective data for this is not enough.