The prospects for Ukraine's financial and economic development in 2010 are gloomy, according to Valeriy Heyets Director of the Economy and Forecast Institute of the Ukrainian National Academy of Sciences.
"Today there are no grounds for great optimism for 2010," he said at a roundtable in Kyiv.
Heyets explained his lack of optimism by the absence of the required reform of the Ukrainian economy over the past few years and problems in the country’s financial sector. He also said that an additional factor for tension would be the possible early parliamentary election after presidential election.
He said that the absence of progress in finding an answer to key economic challenges will allow the national economy to grow only by 2-3%, which would lead to the accumulation of social problems.
"The problems won’t go away, they will grow [with 2-3% GDP growth]. GDP growth has to be at least 5-6%," he said.
He also said that special institutions should be formed to bolster economic development.
Commenting on the banking system, Heyets said that according to the Economics and Forecasting Institute, the share of bad credits is some 25-30%.
"It’s impossible simply to minimize [the share of bad credits]. This is a large figure," he said.
The expert said that work on the liquidation of problems in the banking industry would require additional efforts from the National Bank of Ukraine (NBU), the government and banks.
He added that the situation is complicated by the large deficit of the national budget for 2010 (under various estimates 4-10% of GDP) and a huge debt burden.
"There are various assessments of our debt position: from some $30 billion to $37 billion of debt, which we’ll have to service this year. The serious task of restructuring it has arisen," he said.
Heyets said that taking into account the incentive-based monetary policies pursued in developed countries, there are expectations on the restructuring of 70% of the said debts, and investment inflows to Ukraine.
"We see currency outflow from these countries to other states. We can expect that a run on assets will take place," he said.
The specialist said that investors could show interest in cheap assets in the Ukrainian banking system.
"After the country recovers from the crisis, some 70% of credits will belong to banks with foreign capital and around 50% of the banking system will be under the control of foreign banks," he said.
