The ship of Ukrainian economy is sinking

Ukrainian companies, except for small and low-budget ones, suffered 128.4 billion hryvnia (about $10.6 billion) of losses compared to 1.3 billion hryvnia ($109 million) of profit received during the same period of the previous year, the press service of the State Statistics Service said. 

In particular, in January-March of 2014, compared to January-March of 2013, the  losses of Ukrainian companies increased by 5.2 times - up to 230.2 billion hryvnia. Thus, the losses were the largest in the field of real estate (13.7 times, to 11.379 billion UAH). Financial and insurance activities were next with an increase of 12.2 times, to 17.238 billion UAH.

It was also said that in the first quarter of 2014, compared to the same period in 2013, the number of unprofitable enterprises in relation to their total number has increased by 4.4 percentage points - up to 50 percent.

The largest number of unprofitable enterprises was reported in such sectors: water delivery, sewage (73.2 percent of loss-making enterprises in the industry), arts, sports (66.7 percent), manufacture of coke and refined petroleum products (63.9 percent), manufacture of rubber and plastic products (61.4 percent).

"According to our estimates, this was largely due to balance effects associated with the devaluation of the hryvnia in early 2014," the analysis of the economic situation of Ukraine, prepared by the Department of Statistics, Analysis and Forecast of the National Bank said. 

Such dynamics of financial results, along with reductions in government funding and restrictions in investment activity of banks led to a decrease in capital investment in the first quarter by 23.1 percent, year on year.

The share of the budget in the structure of investments declined from 3.1% to 1.1% (first quarter of 2014 vs. first quarter of 2013), bank loans - from about 25 to 8.7%.

The National Bank of Ukraine expects improved financial results of companies and revitalizing investment activity at the end of the year, "under conditions of further growth in external demand, structural reforms and stabilization of the political situation."

Doctor of Economics, professor, head of the Laboratory of Sociology of Economics at the Institute of Social and Political Studies, Igor Bogdanov, in an interview with Pravda.Ru, spoke about economic implications of the agreement between Ukraine and the EU.

"Will the Russian market suffer from the consequences of the Association Agreement between the EU and Ukraine?"

"Today it is difficult to say, from what the market will suffer in connection with the fact that the influx of Chinese goods continues to grow. They are competitive with European goods. We are concerned about how joint Russian-Ukrainian enterprises will suffer, as Russia was the main country, where Ukraine could ship its goods to. Apparently, there will be no favorable climate for Ukrainian goods. The most important and most difficult thing is when the dangerous military situation ends in Ukraine. Due to the influx of Ukrainian refugees, given that Russia is not at its economic best - all this may lead to a costly social status and social tensions in Russia.

"Measures could be introduced when the implementation of the agreement begins, said presidential spokesman, Dmitry Peskov. Angela Merkel said that until Russia understands that she is not in danger, the implementation will not begin. What may come out of this situation?" 

"European countries are not interested in sanctions given the volume of their investments in Russia. They come from Europe, mostly from Germany, so today Europe is more interested in a stable situation in Russia. Russia is one of most convenient markets in the world. The energy industry of Europe largely depends on Russia, so we do not expect serious sanctions, because it's like being your own worst enemy."

"Why doesn't Russia say anything against Serbia that also has a free trade area with the Customs Union and joins the EU?"

"First, the volume of trade is incommensurable. Secondly, Serbia is not on the border of Russia. Serbian people do not flee to Russia. Economically and socially - the problem is insignificant for us. The entire Baltic region is in the EU, but we're not outraged about it - we continue to cooperate with the region actively. So I do not think that Serbia can be a problem for Russia, just like other countries of former Yugoslavia."

"Why doesn't Ukraine try to establish constructive relations with both Russia and the EU?"

"Unfortunately, in Ukraine, many forces simply do not want that. They could avoid this anti-Russian hysteria, but this is what is happening in Ukraine now. It depends on political forces in today's Ukraine."



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Author`s name Dmitry Sudakov