1.1.2. THE MAIN ECONOMIC PARAMETERS. FORECAST FOR THE YEAR 2001

The year 2001 shall become critical on the way of building economy with stable growth. In this very year we have to make a breakthrough and settle issues of medium-term development strategy.

Real GDP growth is forecast at 4% at the least, production volumes shall add 4%, and agricultural production – 2.5%.

Enhancement of economic productivity will be the main factor for growth in 2001. The trend for expansion of demand, foremost, of investment demand, will proceed.

Real growth of investment in economy (gross stocking) will account for 12.6%, due to:

– qualitative modernization of the already existing capacities. Own funds of enterprises will be the main source to finance such capital repair;

– introduction of idle capacities. In particular, it is expected that enforcement of the Law of Ukraine "On peculiarities of unfinished construction sites privatization" (approved in the second reading on September 14 2000) will facilitate attracting funds to construction, technical re-equipment, and mastering of new technologies;

– commissioning of new capacities, that is transfer to new production technologies.

We forecast:

– increase in foreign investment to USD 900 mln. at the expense of conducting privatization of investment attractive objects for cash solely.

Some UAH 6 bln. proceeds from privatization to the budget are expected. Besides, there will be created off-budget privatization fund, which will accumulate extra fund except for planned volumes.

– inflows of investment to special (free) economic zones and territories with special investment treatment worth USD 350-400 mln. (technical and economic background for creation of these zones foresee USD 1.0-1.2 bln.);

– prevailing internal, mainly, structural factors to start investment activities. Structural reforms in fuel-and-energy complex, agrarian sector, development of certain high-tech production ensure strong demand for investment.

Pursuing stimulating amortization policy (application of amortization ratio of 1.0 in 2001) will facilitate expansion of investment resources (on the whole, amortization allocations will account for UAH 24.3 bln.).

Deficit-free budget means that the Government will not extract the portion of the financial resources from the budget system. That is, the funds accumulated in the banks will not be intended for financing of state consumption but will become the potential source of investment. There will be made active steps towards rehabilitation of banking system initiated by the respective Decree of the President of Ukraine.

Increase in investment demand will also be supported by the decrease in discount rate, since with the inflation forecast at 13.6%, the rate of NBU refinancing cannot stay at the level of 27%.

With aim of attracting own funds of enterprises to investment, analysis of financial reports of enterprises will be stricter. Thus, there started developing of budgets for the state enterprises and joint stock companies with state shareblocks.

The real source to return financial and production resources to the economy will be the wide introduction of measures to renew solvency and bankruptcy. In the nearest time, there will be initiated suits on bankruptcies of the biggest budget debtors concerning wages arrears etc.

Next year, strong external demand will remain. Trade balance will be favorable at USD 2,764 mln. The background for this is:

- A 4.2% growth of global economy in 2001, and a 4% growth of Russia's economy (RF is the main trade partner of Ukraine).

- Favorable conjuncture on the world markets and moderate Hrivnja devaluation (UAH/USD 6.0-6.1 on average annually) will allow expanding total production of enterprises oriented at external market. The growth of export is estimated at 4.2%.

There will be made further steps to access to WTO: negotiation process concerning guaranteed access to the markets of commodities and services, signing bilateral agreements on the issues of tariff concessions and obligations in the field of services with WTO membering countries etc.

Renewal of external financing by the international financial organizations is foremost considered as a source for inflow of external investment and privatization proceeds.

Favorable price terms of development should become the precondition to achieve these results. Moderate inflation tempos (13.6% annually) are based on weighted pricing policy of the Government and monetary policy of the NBU.

Some slower growth rates for money aggregates are forecast in 2001 (monetary stock will increase by 16% vs 33% in 2000, monetary base will add 11% vs 27%). With moderate devaluation, this will enable liquidating monetary pressing on consumer prices and concentrating at key measures for retaining of price growth by such key groups of commodities and services as grain products, fuel and lubricants, as well as public utility and transport services.

However, without creation of proper conditions for increase in internal consumer demand, positive trends will not be that real.

The Government works out a number of measures to settle social issues:

– increase in assignments for wages of budget organization employees;

– ordering terms of payment to employees in budget field with aim of stimulating labor and fixing optimal correlation in scale of wages;

– enforcement of the Law of Ukraine "On making changes to the Criminal Code of Ukraine on administrative violations" with strengthening of criminal and administrative responsibility for delay in wages payment, as well as strengthening of responsibility of managers of the state enterprises for not due payment of wages via expansion of contractual terms with provisions on repaying indebtedness;

– legalization of shadow wages after enforcement of the Laws of Ukraine "On obligatory state pension insurance" and "On non-State pension".

All this, as well as enhancement of labor productivity and recovery of economic activity will ensure in 2001 growth of real wages by 2.9%. A 4.4% growth of real earnings of the population will become not only the factor for increase in private consumption, but will also increase savings of the population. These savings will become one more investment source in future.

Thus, qualitative rather than quantitative factors for real growth of GDP are decisive. Active introduction of the policy of reforms is possible not only at the expense of effective cooperation of the Government and Parliament of Ukraine. This will eventually become the basis, which will lead to improved welfare of the population.

[12.12.2000]

Official date the site was started

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