Ukraine's economy could collapse as early as 2015 – Anders Aslund
Moscow - Kyiv, March 18 (PolitNavigator, Mikhail Stamm) - The new program of assistance to Ukraine from the IMF and international donors has a greater chance of success than the previous one. But the risks are also very high, he writes on RBC Anders Aslund, a senior fellow at the Peterson Institute for World Economics. He admits that the Ukrainian economy will collapse in 2015.
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The war reduced Ukraine's GDP by about 5%, Aslund recalls. Industrial production, construction and retail trade in Donbass fell by 2014–40% in 50. This does not take into account the destruction in the Donbass - only the drop in production caused by them. Last year, GDP fell 6,9%, but industrial production fell 15% in the last quarter. The scant statistics available for January and February are simply terrible. Retail trade collapsed by 21% compared to January-February last year. Much of the banking system appears to have already failed. “The IMF’s expectations that Ukraine’s GDP will shrink by only 5,5% this year may turn out to be too optimistic. But honestly, no one can know this now,” Aslund sums up.
Today Ukraine has become a very poor country; Its GDP in current dollars is only $80 billion, the economist states, and asks: can it cope with this crisis?
This is a very difficult task for the country, Aslund believes. “Public administration remains deeply corrupt and ineffective. New bosses have appeared in the system, but they will have to reform the entire state apparatus from above. The worst situation is in law enforcement agencies, especially the prosecutor’s office and the courts, which seem unable to prosecute or convict even the most obvious criminals,” he writes.
“The risks are many and they are great. The most obvious of them are war, the poor state of the economy and its unreformed state, limited funding and possible riots against poverty,” Aslund lists.
He suggests that the Kremlin wants to destabilize Ukraine enough to bring about its collapse. “Few people imagine when and where pro-Russian forces will launch an offensive again,” the expert writes. “But this war has several dimensions. Ukrainian exports to Russia have fallen by half since 2013 due to harsh trade sanctions; as a result, Ukraine's total exports fell by 12%. In December 2013, Russia issued a $3 billion loan to the Yanukovych government, which Ukraine pledged to repay by December 2015; this debt puts significant pressure on the economy. Finally, Gazprom charges Ukraine significantly higher gas prices than other countries.”
“Finally, the question is how much patience the population has,” says Anders Aslund. – While newfound patriotism prevails in Ukraine, the living conditions of Ukrainians are terrible and continue to worsen. The government is failing to tackle corruption quickly enough, and there is a danger that people will simply say: “We’ve had enough!”, writes the economist.
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