Post by Bonobo on Jan 29, 2022 12:41:53 GMT 1
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Ukraine is much poorer than 30 years ago. These are the reasons for its economic failure
Business Insider Polska
January 29, 2022, 6:35.
Ukraine after 1991 did not achieve economic success even comparable to that of other countries in Central and Eastern Europe. Now it is nearly a fifth poorer than 30 years ago. There were many reasons for this failure.
Ukraine has made many mistakes in the last three decades, but also some circumstances have not been favorable to it.
Ukraine suffered the most from the collapse of the Soviet Union
Macroeconomic and tax errors have been made, and hyperinflation has not been dealt with
Small foreign investment, low industrialization and the weak structure of this part of the economy contributed to poor exports
In addition, there was great corruption and a strong position of the oligarchs defending their interests at the expense of the entire country
Another problem is the aggressive policy of Russia, which not only tried to interfere in the political life of Ukraine, but when it did not work out, it took the eastern part of the country and Crimea, and since 2014 it has regularly threatened with further aggression
More such information can be found on the main page of Onet.pl
Ukraine is a country with an average GDP per capita - in 2020 it amounted to 13 thousand. hole. (according to purchasing power parity). A similar one has, among others, Armenia, Azerbaijan, Libya and Paraguay - according to World Bank data. Other countries in the region are much higher, such as Poland ($ 34.4 thousand) , the Czech Republic ($ 42 thousand), and Romania ($ 32 thousand). For comparison, for example, Spain and Italy have this indicator around 38,000, respectively. and 42 thousand dollars, France and Germany and 47 thousand. and 54 thousand hole.
Difficult time after the collapse of the USSR
The result of the Ukrainian economy may not be fatal, but it is impressive how the country has wasted the last three decades. World Bank data show that Ukraine is now poorer by roughly 20 percent. than it was in 1990 (in terms of GDP per capita). Back then it was even a bit richer than Poland , but the 1990s were marked by a deep recession. And although the first seven years of the 21st century were successful for this country and a large part of the losses from the previous decade were recovered, the years 2008-2020 brought stagnation. Since 1990, Poland's GDP per capita has grown by approximately 180 percent, and for Romania and Belarus by 120 percent each.
If Ukraine had followed the path of Poland or Romania after the fall of the communist bloc, its GDP could reach 30,000-35,000. hole. and would be a country with a near-developed status. Why is this not the case? One of the main problems is the war itself, which started in 2014 (annexation of Crimea). It froze foreign investment, contributed to a large increase in inflation and a decline in the value of the hryvnia. Part of eastern Ukraine was destroyed or fell into the hands of the occupiers, and the government had to increase military spending. However, Ukraine's economic problems began long before the conflict with Russia.
It is therefore necessary to go back to the 1990s. Ukraine suffered most from the collapse of the USSR. One of the reasons was hyperinflation, which reached even 10,000. percent in 1993 and was several times higher than, for example, in Russia and Belarus. The reasons for this are unclear, but one explanation may be corruption, the lack of a strong leader, and greater influence of the oligarchs than in other countries. They blocked the consolidation of public finances and allowed excessive monetary expansion to maintain their interests.
Poor industrial production
The source of the problem, apart from macroeconomic factors, was also the weakness of Ukrainian companies. The economy of this country was more based on production than other former USSR republics (those countries had natural resources, mainly energy resources). Russia maintained a lot of economic relations with Belarus and supported its companies, but Ukraine underwent a more shocking change and suffered the most from the collapse of the USSR.
By 2000, Ukraine's macroeconomic situation had stabilized and economic growth emerged. Why wasn't he faster? One of the reasons is the weakness of Ukrainian exports. Selling agricultural products is usually not enough to lift a country out of poverty , it is necessary to achieve a competitive position in the international market with other products. Poland, Romania and Turkey, which achieved economic success, exported many processed products, such as car parts and electronics. They became the production base for large countries and produced high-value goods for a lower price.
The opposite was true for Ukraine: its exports are based on simple low-value goods: agricultural products (mainly corn, wheat, rape and soybeans), sunflower oil, metals, and wood. The share of industry in the Ukrainian economy is much lower (10%) than, for example, in Poland, where it is over 20%. One of the reasons for the low industrialization was very low foreign direct investment in Ukraine (as opposed to Poland). And if they were, they did not apply to industries with high added value.
An oligarchic burden
Why has Ukraine not attracted more investments? One of the important reasons is the mistake of Ukrainian politics in protecting the oligarchs who acquired ownership after the collapse of the USSR. They took over large, although usually ineffective industrial companies, and derived a lot of income from them. This stopped the flow of foreign capital and investments. The oligarchs did little to develop their conglomerates. At the same time, the state promoted foreign investments in the financial and real estate sectors, which turned out to be a disastrous decision, because it was they that suffered the most from the financial crisis in 2008.
In addition, Russia turned off the tap with cheap gas . It continued to flow even after 1991, which was a de facto subsidy for the Ukrainian economy, but in 2007-2009 Russia heavily increased gas prices for Ukraine, which hit an ineffective and outdated industry largely controlled by oligarchs.
Ultimately, Moscow, which began to lose its political influence in Kiev, decided in 2014 to seize Crimea and support the separatist forces that had severed the eastern part of the country from Ukraine. Since then, tensions have been sustained between Ukraine and Russia, and Moscow has regularly threatened with aggression - currently up to 250,000 people may be gathered around the borders of our eastern neighbor. Russian soldiers.
Another reason for Ukraine's weakness is corruption, although the scale of this phenomenon is difficult to measure. The share of billionaires in Ukraine's GDP is one of the highest in the region (it amounts to nearly 20% compared to 2% in Poland, 7% in the Czech Republic or 23% in Russia). This causes the ineffectiveness of the tax system and the excessive growth of the shadow economy. All this is conducive to the development of corruption and organized crime. The oligarchs were strong enough to block policies that help the economy but harm them. The state administration was also corrupt.
Ukraine is much poorer than 30 years ago. These are the reasons for its economic failure
Business Insider Polska
January 29, 2022, 6:35.
Ukraine after 1991 did not achieve economic success even comparable to that of other countries in Central and Eastern Europe. Now it is nearly a fifth poorer than 30 years ago. There were many reasons for this failure.
Ukraine has made many mistakes in the last three decades, but also some circumstances have not been favorable to it.
Ukraine suffered the most from the collapse of the Soviet Union
Macroeconomic and tax errors have been made, and hyperinflation has not been dealt with
Small foreign investment, low industrialization and the weak structure of this part of the economy contributed to poor exports
In addition, there was great corruption and a strong position of the oligarchs defending their interests at the expense of the entire country
Another problem is the aggressive policy of Russia, which not only tried to interfere in the political life of Ukraine, but when it did not work out, it took the eastern part of the country and Crimea, and since 2014 it has regularly threatened with further aggression
More such information can be found on the main page of Onet.pl
Ukraine is a country with an average GDP per capita - in 2020 it amounted to 13 thousand. hole. (according to purchasing power parity). A similar one has, among others, Armenia, Azerbaijan, Libya and Paraguay - according to World Bank data. Other countries in the region are much higher, such as Poland ($ 34.4 thousand) , the Czech Republic ($ 42 thousand), and Romania ($ 32 thousand). For comparison, for example, Spain and Italy have this indicator around 38,000, respectively. and 42 thousand dollars, France and Germany and 47 thousand. and 54 thousand hole.
Difficult time after the collapse of the USSR
The result of the Ukrainian economy may not be fatal, but it is impressive how the country has wasted the last three decades. World Bank data show that Ukraine is now poorer by roughly 20 percent. than it was in 1990 (in terms of GDP per capita). Back then it was even a bit richer than Poland , but the 1990s were marked by a deep recession. And although the first seven years of the 21st century were successful for this country and a large part of the losses from the previous decade were recovered, the years 2008-2020 brought stagnation. Since 1990, Poland's GDP per capita has grown by approximately 180 percent, and for Romania and Belarus by 120 percent each.
If Ukraine had followed the path of Poland or Romania after the fall of the communist bloc, its GDP could reach 30,000-35,000. hole. and would be a country with a near-developed status. Why is this not the case? One of the main problems is the war itself, which started in 2014 (annexation of Crimea). It froze foreign investment, contributed to a large increase in inflation and a decline in the value of the hryvnia. Part of eastern Ukraine was destroyed or fell into the hands of the occupiers, and the government had to increase military spending. However, Ukraine's economic problems began long before the conflict with Russia.
It is therefore necessary to go back to the 1990s. Ukraine suffered most from the collapse of the USSR. One of the reasons was hyperinflation, which reached even 10,000. percent in 1993 and was several times higher than, for example, in Russia and Belarus. The reasons for this are unclear, but one explanation may be corruption, the lack of a strong leader, and greater influence of the oligarchs than in other countries. They blocked the consolidation of public finances and allowed excessive monetary expansion to maintain their interests.
Poor industrial production
The source of the problem, apart from macroeconomic factors, was also the weakness of Ukrainian companies. The economy of this country was more based on production than other former USSR republics (those countries had natural resources, mainly energy resources). Russia maintained a lot of economic relations with Belarus and supported its companies, but Ukraine underwent a more shocking change and suffered the most from the collapse of the USSR.
By 2000, Ukraine's macroeconomic situation had stabilized and economic growth emerged. Why wasn't he faster? One of the reasons is the weakness of Ukrainian exports. Selling agricultural products is usually not enough to lift a country out of poverty , it is necessary to achieve a competitive position in the international market with other products. Poland, Romania and Turkey, which achieved economic success, exported many processed products, such as car parts and electronics. They became the production base for large countries and produced high-value goods for a lower price.
The opposite was true for Ukraine: its exports are based on simple low-value goods: agricultural products (mainly corn, wheat, rape and soybeans), sunflower oil, metals, and wood. The share of industry in the Ukrainian economy is much lower (10%) than, for example, in Poland, where it is over 20%. One of the reasons for the low industrialization was very low foreign direct investment in Ukraine (as opposed to Poland). And if they were, they did not apply to industries with high added value.
An oligarchic burden
Why has Ukraine not attracted more investments? One of the important reasons is the mistake of Ukrainian politics in protecting the oligarchs who acquired ownership after the collapse of the USSR. They took over large, although usually ineffective industrial companies, and derived a lot of income from them. This stopped the flow of foreign capital and investments. The oligarchs did little to develop their conglomerates. At the same time, the state promoted foreign investments in the financial and real estate sectors, which turned out to be a disastrous decision, because it was they that suffered the most from the financial crisis in 2008.
In addition, Russia turned off the tap with cheap gas . It continued to flow even after 1991, which was a de facto subsidy for the Ukrainian economy, but in 2007-2009 Russia heavily increased gas prices for Ukraine, which hit an ineffective and outdated industry largely controlled by oligarchs.
Ultimately, Moscow, which began to lose its political influence in Kiev, decided in 2014 to seize Crimea and support the separatist forces that had severed the eastern part of the country from Ukraine. Since then, tensions have been sustained between Ukraine and Russia, and Moscow has regularly threatened with aggression - currently up to 250,000 people may be gathered around the borders of our eastern neighbor. Russian soldiers.
Another reason for Ukraine's weakness is corruption, although the scale of this phenomenon is difficult to measure. The share of billionaires in Ukraine's GDP is one of the highest in the region (it amounts to nearly 20% compared to 2% in Poland, 7% in the Czech Republic or 23% in Russia). This causes the ineffectiveness of the tax system and the excessive growth of the shadow economy. All this is conducive to the development of corruption and organized crime. The oligarchs were strong enough to block policies that help the economy but harm them. The state administration was also corrupt.