THE IMPACT OF THE GLOBAL LIQUIDITY CRISIS IN UKRAINE AND THE ROAD TO ECONOMIC RECOVERY
Early signs of economic recovery in Ukraine,
but conditions remain challenging
1st Annual International Forum on the Economic Development of Ukraine
Ukraine Economic Development Forum – Ukraine
Washington, D.C., Wednesday, Oct 28, 2009
WASHINGTON, D.C. - The 1st Annual International Forum on the Economic Development of Ukraine was held Thursday, October 15, 2009, at the Knight Conference Center, Newseum, in Washington, D.C. The theme of the Forum was "The Impact of the Global Liquidity Crisis on Ukraine and the Road to Economic Recovery." Over 240 people attended the Forum, which was the largest event ever held in Washington specifically focused on the development of Ukraine's economy.
The Forum discussed the reasons why the global liquidity crisis affected Ukraine more than most emerging markets. It was noted that Ukraine is an open economy with exports representing about half of GDP. But these exports are undiversified, concentrated in a few commodities, mainly metals, and in a few countries, principally in the CIS. As commodity prices collapsed during the crisis, exports dropped by more than 50%, affecting the economy significantly.
In addition, Ukraine was vulnerable to the global liquidity crisis because in the past few years it has been incurring large deficits in its balance of payments, had accumulated large amounts of short term foreign debt, and the banking sector was weakened by increasing levels of bad debts. The possibility that Ukraine will not be able to cover its international financial requirements led to a loss of confidence and a collapse of the currency.
Nevertheless, Ukraine should be able to recover quickly from the crisis, as metal prices are already rebounding. Business executives participating in the Forum were also quite optimistic about Ukraine, noting that, despite the crisis, many Western companies have been able to increase sales and profits.
The Forum concluded there are early signs of economic recovery in Ukraine, but conditions remain challenging. In the short term, Ukraine will require continued financial assistance from the international financial institutions, particularly from the International Monetary Fund, to cover its foreign financing requirements. This will require the country to implement prudent fiscal and monetary policies.
Over the medium term, Ukraine has many favorable conditions that would provide it with a bright future, including an abundant and educated labor force, labor wages that are a fraction of wages in Eastern Europe, a large population, close proximity to the EU, which could be exploited by a forthcoming FTA, significant agricultural potential, and a reasonable infrastructure and technological base. But the realization of this brighter future will require a major improvement in Ukraine's business climate.
KEYNOTE SPEAKER DR. EDILBERTO SEGURA
One of the three keynote speakers at the Forum was Dr. Edilberto Segura, Partner and Senior Economist, SigmaBleyzer and Chairman of the Board, The Bleyzer Foundation (TBF). Dr. Segura's presentation was entitled, "The Impact of the Global Liquidity Crisis on Ukraine and the Road to Recovery."
Dr. Segura stated during his speech, "The international liquidity crisis, which rapidly unfolded across the globe in the fall of 2008, interrupted the growth cycle of Ukraine and many other emerging markets. Amidst these global economic difficulties, Ukraine suffered one of the deepest economic downturns and sharpest currency depreciations during the most severe phases of the crisis. Although the pace of economic slowdown in Ukraine has recently decelerated, overall economic conditions remain challenging."
Dr. Segura's keynote speech at the Forum included a PowerPoint presentation. The PowerPoint presentation used by Dr. Segura, which includes several detailed charts and graphs, can be found at http://usubc.org/news/drseguraeconomicdevforum09.php.
THE BLEYZER FOUNDATION POSITION PAPER:
The Bleyzer Foundation (www.BleyzerFoundation.com) presented a position paper at the Forum entitled, "The Impact of the Global Liquidity Crisis on Ukraine and the Road to Recovery."
The Bleyzer Foundation position paper " is a brief summary of the key economic challenges facing Ukraine. The disproportionately large impact of the recent international liquidity crisis on Ukraine, compared to other peer economies, calls for a thorough assessment of pre-crisis economic conditions and policies. A good understanding of these issues is necessary to evaluate the effectiveness of adopted anti-crisis measures. More than that, this analysis will help to calibrate current macroeconomic policies in order to achieve a quick and sustainable economic recovery."
The major issues covered by the position paper are:
- Why did the international liquidity crisis affect Ukraine more than other emerging economies?
- Ukraine’s main vulnerabilities to the financial crisis in 2008.
- Why the local currency depreciated more than the currencies of other countries.
- Why the real sector, including GDP and exports, declined so dramatically.
- What measures taken by the Ukrainian authorities to deal with the crisis were adequate and what measures were inadequate.
- Measures that the country could undertake to avoid deepening the crisis during the Presidential election period and until a new government is in place.
- Measures that the country should undertake in the medium term to accelerate economic development.
· in English click on: http://usubc.org/reports/TBFPositionPaperForum09En.pdf;
· in Ukrainian click on: http://usubc.org/reports/TBFPositionPaperForum09Ua.pdf.
SPEAKERS, PANELISTS AND MODERATORS
Key note speakers at the Forum in Washington were: (1) Hrygoriy Nemyria, Vice Prime Minister of Ukraine, who spoke on Ukraine’s Response to the Current Crisis and Perspectives for 2010; (2) William B. Taylor, Jr., Vice President, Peace and Stability Operations, U.S. States Institute of Peace (USIP), former U.S. Ambassador to Ukraine, speaking on the US Support to Global Economic Recovery and to Ukraine and (3) Dr. Edilberto Segura, Chairman of the Board, The Bleyzer Foundation (TBF) making a presentation on The Impact of the Global Liquidity Crisis on Ukraine and the Road to Recovery.
Other speakers, panelists and moderators included: (4) Ariel Cohen, Senior Research Fellow, The Kathryn and Shelby Cullom David Institute for International Studies, The Heritage Foundation; (5) Ihor A. Shumylo, Executive Director, Economic Issues, Member of the Management Board, National Bank of Ukraine; (6) Chris Wilson, Assistant U.S. Trade Representative for Europe and the Middle East, U.S. Office of the Special Trade Representative; (7) Michael Bleyzer, Managing Partner, President & CEO, SigmaBleyzer; (8) Bohdan Danylyshyn, Minister of Economy of Ukraine; (8) William Miller, Senior Policy Scholar, Woodrow Wilson International Center for Scholars, former U.S. Ambassador to Ukraine; (9) Ambassador John E. Herbst, Coordinator for Reconstruction & Stabilization, U.S. Dept of State, former U.S. Ambassador to Ukraine; and (10) Chrystia Freeland, U.S. Managing Editor, Financial Times.
Additional program participants in Washington included: (11) George Logush, Vice President Kraft Foods, Area Director: Ukraine, Eastern Europe, Central Asia; (12) Jorge Zukoski, President, American Chamber of Commerce in Ukraine; (13) Jock Mendoza-Wilson, Director of International & Investor Relations, Systems Capital Management (SCM); (14) Dr. Irina Paliashvili, President and Senior Counsel, RULG-Ukrainian Legal Group; (15) Olexandra Kuzhel, Head of the Ukrainian State Committee for Regulatory Policy and Entrepreneurship and (16) Morgan Williams, Director, Government Affairs, SigmaBleyzer, Washington; President, U.S.-Ukraine Business Council (USUBC).
Participating by live TV link from Kyiv included: (1) Martin Raiser, Country Director, The World Bank; (2) Ceyla Pazarbasioglu, Assistant Director of the European Department and Head of the IMF Mission to Ukraine, International Monetary Fund (IMF); (3) Andre Kuusvek, Country Director, European Bank for Reconstruction and Development (EBRD); (4) José Manuel Pinto Teixeira, Ambassador, Head of the EC Delegation to Ukraine; (5) Valery Heyets, Head of the Institute for Economics and Forecasting, Ukrainian National Academy of Sciences; (6) Oleg Ustenko, Executive Director, The Bleyzer Foundation (TBF) and (7) Andriy Kravets, Deputy Minister, Ministry of Finance.
Economic Development Forum Ukraine, www.edfukraine.com;
The Bleyzer Foundation, www.BleyzerFoundation.org;
U.S.-Ukraine Business Council (USUBC), www.usubc.org.