BNE IntelliNews – Ukraine Poised for Take Off
Ukraine poised for take off
When Ukrainian President Volodymyr Zelenskiy took over in April 2019 there was a huge wave of optimism that the country would finally start on the “catch up” growth that had been put off for almost three decades. Pretty much every other country in the Commonwealth of Independent States (CIS) has benefited from this – even Belarus – to a greater or lesser degree. It’s easy growth as what you need to do is very simple: privatise and modernise.
Russia is the furthest advanced and already well into the next stage, which is much harder to deal with: the middle income trap. I post a blog I wrote on this in 2017 for reference. The point of Putin’s 12 national projects is to escape that trap, but it’s not going well.
I met with the new head of UkrInvest here in Berlin last week on the sidelines of the annual German-Ukraine Investment Summit and wanted to write an upbeat piece as several important things have happened in recent months that at least set the stage for Ukraine’s economy to finally take off.
It was clearly naïve to expect the economy to boom immediately after Zelenskiy was elected, despite the frenetic activity in the autumn of 2019. Zelenskiy is a complete political neophyte trying to control the snake-pit of Ukrainian domestic politics, but now after almost two years on the job he is perhaps starting to find his feet and more importantly making some really tough choices that he has put off until now: should he back the oligarchs or the people? Until now he has tried to do both, but he now has to chose and seems to have come down on the people’s side. But he is still guilty of flip-flopping so success is not a given at all.
But Ukraine has another good opportunity to fix its problems, as this year the economy has the strong tailwind of an economy bounce back that should produce about 5% growth. If Zelenskiy can start the virtuous circle of rising investment, increased profits and more investment that leads to rising wages and accelerating consumption that drove Russia’s boom in the noughties the results would be spectacular and everyone would make a lot of money. The jury is still out. Certainly the head of UkrInvest is optimistic, but let’s just say it won’t be easy.