Ukraine’s economy will shrink by 3.5% in 2020 due to the coronavirus-related crisis, while the global economy will lose 5.2% overall, the World Bank announced this in the updated Global Economic Prospects on Tuesday. “The depth of the contraction will depend on the duration of the health crisis, progress on major pending reforms, and the ability to mobilize adequate financing to meet sizable repayment needs,” the World Bank said.
According to the bank, next year the growth of the Ukrainian economy will resume at a rate of 3%, which is lower than the expected recovery of the global economy at 4.2%.
The World Bank said that compared with the previous forecast in January of this year, it worsened expectations of the dynamics of Ukraine’s GDP this year by 7.2 percentage points (pp), and in the next – by 1.2 pp.
The growth of Ukraine’s economy in the fourth quarter of 2019 slowed down to 2.2% and will again exceed 3% in the first quarter of 2020, Dmytro Sologub, the Deputy Governor of the National Bank of Ukraine (NBU), has stated. “According to our estimates, behind the growth figure [GDP] of 3.3% in 2019 is the fourth quarter growth of 2.2% … Regarding the first quarter, we currently have an estimate of GDP growth above 3%,” he said at a briefing in Kyiv.
As reported, the NBU worsened the forecast for GDP growth in 2019 to 3.3% from 3.5% and kept it at 3.5% in 2020 and 4% in 2021.
Ukrainian government has to work to promote “sustainable optimism,” to do something the people would really believe in, said Economist Robert J. Shiller, 2013 Nobel Laureate in Economics. “We need the optimism that we see now in Ukraine to be sustainable. We do not look at the latest growth numbers as an indication of success, but we have to look at how the culture is changing,” the economist said at a Ukrainian breakfast hosted by the Victor Pinchuk Foundation in Davos. Shiller emphasized the importance of cultural change in Ukraine through education, especially regarding corruption perception.
“We do not look at the latest growth numbers as an indication of success, but we have to look at how the culture is changing,” the Nobel laureate said.
Chief Executive Officer of General Atlantic Bill Ford added that Ukraine was lucky to have a powerful education system and very strong engineering talents.
“But that talent has to believe in the opportunity and return to Ukraine and develop business here. Ukraine is going to see a generation of young people who will build digital businesses within Ukraine. I think that the thing that will really create enthusiasm and confidence for the country is young entrepreneurs who will build real businesses and real success in bringing technology in,” the expert noted.
He emphasized that other components of success are the fight against corruption and the rule of law.
“Ukraine’s problem with the corruption is not so much the corruption itself but the perception of corruption,” Co-Founder and Co-Executive Chairman of The Carlyle Group David M. Rubenstein said at the Ukrainian breakfast in Davos. He explained that many investors eager to invest in emerging markets because they are seeking higher rate of investment return are afraid of being criticized because even though you did nothing wrong, because of that perception of the corruption, people would think you do something wrong.
“I think, Ukraine has to work on its image as well as the reality. I think that the government is interested in attracting foreign capital and getting rid of the perception of corruption as well as the reality,” he added.
Businessman and philanthropist Victor Pinchuk also emphasized that Ukraine, along with continuing reforms and confronting Russian aggression, needs to build a strong narrative.
“Many agree that in terms of reforms and defending against the aggression, Ukraine’s leadership does a job that is not bad at all. The narrative is also crucial. We must be everywhere and show simply the truth. It is not all white but much whiter than the stereotype,” Pinchuk said.
Ukraine’s GDP growth will reach 3.2% in 2020 with a further acceleration to 3.6% in 2021, Morgan Stanley predicts.
Since the prospect of land reform is becoming more defined, the bank is raising its forecast for the economic growth of Ukraine and the hryvnia exchange rate. Now it expects GDP growth by 3.2% in 2020 with a further acceleration to 3.6% of GDP in 2021. The bankers also forecast the hryvnia exchange rate of UAH 26.5/$1 at the end of 2019 and UAH 27.5/$1 by the end of 2020.
According to the report, Morgan Stanley also expects the first tranche from the International Monetary Fund for Ukraine before the end of this year, which could follow the adoption of the law on the national budget of Ukraine for 2020.
President of Ukraine Volodymyr Zelensky has proposed turning the Chornobyl zone into one of the points of economic growth in Ukraine.
“Today I’ve signed a decree that will be the beginning of transformation of the exclusion zone into one of the growth points for new Ukraine,” he said at Chornobyl Nuclear Power Plant, where the ceremony of transferring a new safe confinement will take place.
The Ukrainian designer of software Intellias is mulling a possibility of acquiring some companies for further growth, including companies with development centers in Eastern Europe, the co-founder and Board Chairman of Intellias Mykhailo Puzrakov has said in an interview with Die Welt. “So far we have grown organically. I believe, however, that maybe even next year we could start to consider some acquisitions. We are interested in companies that could interact with Intellias: companies with development centers in Eastern Europe, or companies with a client base that could complement ours. In addition, we will consider companies that have some experience or products that will help us gain new customers,” he said.
Puzrakov also announced plans to expand the company’s presence in Berlin next year – now only one employee works in the Berlin office of Intellias.
According to him, today one of the main advantages of Intellias is the ability to quickly scale the team, which is often required by their European customers.
Puzrakov also said that the company has ceased to be a startup, moving into the category of a successful and profitable business, but is still at the beginning of the growth stage.
Intellias was founded in Lviv in 2002. Its offices are located in Kyiv, Lviv, Odesa, Kharkiv and Berlin.