Ukraine has made significant headway reforming its economy since the revolution. But quite a bit remains to be done, and the short-term outlook is grim.
© REUTERS/Vasily Fedosenko
The economic situation is indeed frightful, with GDP dropping by 17.2 percent in annualized terms in the first quarter and 14.7 percent in the second quarter – and though the decline in output is beginning to level off, forecasts for the year as a whole predict a decline of 9-12 percent. Annual inflation peaked at 61 percent in April before dipping to 55 percent in July.
But much has gone right, more than Ukrainians usually realize.
Soon after the democratic breakthrough in February last year, Ukraine carried out presidential and parliamentary elections. Pro-European reformers won both, laying a political base for serious democratic and market economic reforms. Until the parliamentary elections on October 26, 2014, the old vested interests dominated the parliament, blocking most reform legislation; now reform has a political mandate.
On December 2, a new government was appointed. It is younger and more qualified than any previous Ukrainian government. Tellingly, in the last government of ousted pro-Russian president Viktor Yanukovych only two ministers spoke English; now only two ministers in the current government do not. The typical new minister is a 38-year old investment banker with a Western MBA. Most are clearly not corrupt, and are strongly committed to sensible reforms. The sort of radical anti-corruption reforms Ukraine needs are usually carried out by young, well-educated outsiders without connections to the old regime. Of Ukraine’s 20 new ministers, only five had been ministers before December 2014, and only the prime minister served under the old regime. Ukraine finally has a credible reform team.
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Read the complete article in the Berlin Policy Journal App – September/October 2015 issue.
