Ukraine's economy resilient to external risks

The development of mutually beneficial cooperation with the European Union and Russia helps the government reduce the impact negative trends on external markets on the domestic economy, the Information-analytical Bulletin of the Cabinet of Ministers of Ukraine informs.

Maxim Duda, Deputy Director of Department of Macroeconomic Forecasting of the Ministry of Economic Development and Trade (MEDT) has noted that due to strong growth in consumer demand, Ukraine has partially offset the negative impact of external factors and demonstrated the best economic performance in comparison with the EU countries. If in QII 2013 the EU recorded an increase in consumer demand by 0.2%, it was up 5.5% in Ukraine.

Officials at the Ministry of Economic Development say economic reforms undertaken by the government have helped mitigate the downward trend of investment activity recorded in a number of European countries during the first 6 months of 2013. Ministry statistics show that in QII 2013 the gross domestic product of the Netherlands and Spain fell by 1.7%, Italy - 2.6%, Portugal - 2.5%, Greece - 3.8%.

Valeriy Litvitskiy, Chief Advisor to the National Bank of Ukraine (NBU) chairman expects Ukraine's GDP to improve on the recent 0.2% uptick.

To this end, projects under the auspices of the State program to revitalize development of economy 2013-2014 are being implemented. Most of them are associated with high innovation. The government intends to use the program to stimulate development of the most advanced and modern sectors of the economy and switch from resource-based industries to innovative technologies.

The government strategy aims to harmonize trade regimes operating in the EU Free Trade Zone (FTZ) and the Customs Union. Ukraine wants them to develop mutually beneficial cooperation. This is an achievable goal based on the principles of Free Trade Zone of the World Trade Organization, which Ukraine joined in May 2008. Russia acceeded to the WTO in August 2012.

The Ministry of Revenue and Duties of Ukraine has already reached an agreement with the Federal Customs Service of Russia on abolition of additional customs procedures for Ukrainian goods crossing over. So the problems were resolved that arose in August 2013 due to increased checks of the Ukrainian exporters' shipments at the Russian customs.

Russia has erects barriers not only on the border with Ukraine. As the third largest EU trade partner (after China and the United States), Moscow periodically strengthens restrictions for European exports. The latest case started in last fall and was resolved only ten months afterwards. It affected European countries and led to losses amounting to about 7 billion euros.

Experts say increased Russian protectionism is part of the anti-crisis policy Kremlin leaders have elected to follow in order to mitigate financial meltdown. They also draw attention to the relationship of the national economies of Ukraine and Russia formed during the Soviet era. At the time, there was strong cooperation between industries and enterprises of both countries (e.g., raw materials were produced in one country, and the enterprise for its processing and production of finished goods was located in the other).

Negative trends in the Russian economy are reflected in Ukraine's economy. According to European Bank for Reconstruction and Development, a 1% decline in Russia's GDP automatically leads to the same GDP drop in Ukraine.