Resource information
This report undertakes a comprehensive
assessment of Ukraine's growth experience over the past
decade. It shows how vulnerabilities were allowed to
accumulate during the economic boom. And how growth,
averaging seven percent annually between 2000 and 2008, was
achieved without tackling Ukraine's well known
weaknesses in the investment climate and public sector
governance. The report also traces the emergence of large
structural fiscal deficits and fiscal pressures since 2004,
as buoyant revenues and terms of trade gains masked an
increasingly unsustainable fiscal position. It shows how
international excess liquidity allowed Ukraine to attract
vast capital flows, intermediated through the banking
system, while financial sector regulation remained
inadequate. And it analyzes how a poor investment climate,
low competitive pressures, limited innovation and slow
structural transformation of the economy are all interlinked
and perpetuate Ukraine's dependence on a few commodity
based exports. Consequently, the report argues, the route to
sustained recovery in Ukraine lies in deepening key reforms.
The report carries out an in-depth diagnostic of
Ukraine's growth drivers at the macro, sector and
firm-level and derives key constraints to sustained growth
from this analysis. The recommendations point to three main
challenges that deserve priority attention if Ukraine is to
re-launch its economy on a sustained growth path. First,
Ukraine has to tackle its fiscal crisis to restore
macroeconomic credibility and create fiscal space for
investments needed to support private sector growth. Second,
Ukraine needs to improve its investment climate and fix the
financial system to attract private sector investment.
Third, Ukraine needs to tackle the problems with public
sector governance through deep public sector, judicial and
administrative reforms. Since this is a large agenda, the
analysis identifies short and medium term priorities. The
report also argues that the key reforms highlighted above
are closely interlinked and that cosmetic and halfway
measures will not do.
