Forecasting the development of the economy of Ukraine according to the one-sector Solow model

Abstract

Economic forecasting is an important tool for many actors in the economy, such as governments, companies, investors and consumers. The difficult economic conditions caused by the war cause the need to determine the possible development of the economy of Ukraine, assuming that such a catastrophe would not have occurred. The paper examines the use of the single-sector Solow model for forecasting the development of Ukraine's economy for 2022-2027, assuming the absence of hostilities. The reason for choosing this particular model is: the single-sector Solow model allows you to calculate indicators such as potential output and growth rates, which help in forecasting the future development of the economy; can be used to assess the impact of various economic policies on growth and production; does not take into account the complex dependencies and detailing of various sectors of the economy. This allows for faster and easier forecasting of the main trends and the impact of key factors on economic growth. Statistical data for 2010-2021 were used for the model, based on which models of changes in the share of the working population, changes in the intensity of investment, and production function coefficients were calculated. As a result of the table's calculations, there is direct uncertainty, the stock market, according to the forecast, will continue to fall, despite the constant rise according to statistical data. The production function has values that are not typical for developed countries. For them, the coefficient must be two-digit, and the degree at - less than one. Armed forces in Ukraine should grow according to scenario 1, i.e. very slowly, but in fact the forecast is downward. The limitations of the Solow model regarding the idea that the economy works in stable conditions do not take into account factors inherent in the economy of Ukraine, such as inflation, financial crises, trade barriers, wear and tear of equipment, anomalous type of production function, etc. Therefore, the single-sector Solow model is practically not suitable for forecasting in the current period. Further research should be aimed at determining the reasons for the decline in the forecast according to the Solow model.