“ Ukraine has to build the reputation of the country as a reliable place to do business. ”
Last year was a bit boring for Ukraine without any major events, particularly in the business world. That can hardly be said for 2019, which is certain to be eventful.
The oft-discussed political developments will merely serve as a background. Taking them as a given, it’s worth focusing on the economic opportunities that this new year will bring. And many of the positive things that can occur this year have already been set in motion.
The biggest effect will be felt from the recently approved creditor rights legislation, which includes a new bankruptcy code for individuals, both of which will make it easier for banks to recover their loans. From the monetary policy end, the gradual reduction of the National Bank’s discount rate will also stimulate lending activity for banks, possibly even reviving the all-but-dead mortgage market. Property prices will grow in turn, spurring growth in related sectors.
Beyond the real estate market, wages will inevitably grow and even outpace inflation since ongoing European demand for Ukrainian labor will be harder to restrain. That will invigorate the service sector.
Medical reforms are plowing forth, making it possible to make our medical system more effective, and hopefully more accessible. We see wonderful opportunities here, particularly for private medicine in which we will continue to invest – states Igor Mazepa.
Legislation approved last January has enabled the launch of the state’s Big Privatization of large assets, which I am confident will begin this year and with our active involvement. I can assure the public that the majority of assets targeted for privatization won’t be affected by this year’s political risks. At minimum, they will weaken opposition to the privatization process from political circles, which will be a great success in and of itself. And the Big Privatization should boost the interest of foreign investors in our market, perhaps even leading to a boom that we haven’t seen in more than a decade.
This year’s risks need to be taken into account, including the possible drop in raw material prices, which is being discussed with increasing certainty for more than a year now. Even higher interest rates for foreign loans will make life even more difficult for both the state and business, and the specter of losing out on further IMF loan tranches is growing owing to risky promises being made by populist politicians, who are surging in the polls.
I don’t expect these promises will be fulfilled considering just how important IMF cooperation is for Ukraine. Regardless of their rhetoric, every thinking politician is aware that surviving 2019 and 2020 without economic damage will require securing further lending from Western IFIs. (Even in the most extreme scenario, I don’t think we can count on Russia’s financial help.)
Of course, Ukrainians are increasingly reaching the understanding the IMF won’t help us become wealthier. The IMF is merely a doctor who helps us treat our economic illnesses, of which there are many due to failure to uphold standards of rule of law. As a result, corruption continues to plague government offices, committed by those seeking to enrich themselves at the nation’s expense.
So the events that didn’t occur in 2018, or were postponed, will serve as an excellent foundation for a new year that promises to be both dramatic, and productive for Ukraine. And we’ll be at the forefront of making sure 2019 becomes a turning point for Ukrainian business.
Copyright © 2018 Igor Mazepa