Abstract
The article presents a systematic analysis of the risks of the Ukrainian financial system and offers suggestions that encompass a set of structural reforms aimed at expanding its role in returning the country to sustainable development. It is shown that the national economy has not managed to achieve an outstripping pace of development like most «post-planned» economies of Eastern Europe. The main reason for this has always been a lack of strong and independent governmental institutes and, consequently, structural reforms. Reforms in the real economy have been substantiated in the scope of the energy sector in view of the transition to market rules and use of anti-monopoly measures. Considering the financial system, the author justifies a higher degree of operational independence for the National Bank of Ukraine as a regulator, its broader authority to regulate non-banking institutions, transition to commercial and state banks using standardized principles of deposit insurance, and mandatory calculation of borrower’s credit rating when approving loans. In view of the sizable state budget deficit, improvements to the pension system are examined. It is argued that its improvement must focus mostly on eliminating privileges, revision of the retirement age for some population categories, creation of non-state pension funds and their introduction to the financial markets.
Highlights
In the last five years since the crisis of 2014-2015, the Ukrainian authorities have managed to achieve macroeconomic stabilization
The paper uses methods of theoretical and empirical analysis to determine the main macroeconomic imbalances and risks in the economy of Ukraine, as well as methods of comparative and graphical analysis to study the dynamics of major macroeconomic trends to develop general recommendations for implementing structural reforms in Ukraine
The estimate of Ukraine’s potential GDP in 2021 provided by the NBU decreased significantly over 2020 from the 3.5-4 percent previously projected in 2018-2019 to 2-2.5 percent. This indicates that the growth potential of the Ukrainian economy is limited without radical structural reforms, and it will gradually be exhausted, impeding the ability of Ukrainian’s economy to return to sustainable economic growth
Summary
In the last five years since the crisis of 2014-2015, the Ukrainian authorities have managed to achieve macroeconomic stabilization. The bar for this growth was very low after the fall during 2014-2015 and, it was not based on completed fundamental structural reforms Most likely, such growth can be considered extensive, i.e. not accompanied by a significant increase in fixed capital investment. Some reforms have been launched and yielded some results, the lack of progress in the judicial reform and opposition to the newly established anti-corruption bodies have resulted in high levels of corruption and an unattractive investment climate when compared to neighbouring Eastern European countries. This situation continues to affect the outflow of foreign direct investment and makes business in Ukraine difficult and risky. The lack of widespread privatization of state-owned enterprises and the slowdown in the land market make the economy less competitive and less efficient
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