A few notable developments in Ukraine in the last few days:
First, in recent days there appears to have been another upsurge in fighting in the east around Donetsk. Earlier Ukrainian reports had it that there had been some reinforcement by Russia of positions in the east – but this might just be regular troop rotation. Local reports also had it that Ukrainian forces had made some advances up to the existing front line – around 1 kilometer. We have seen this before from both sides as key negotiations/summits are looming, and this time we have U.S. President Donald J. Trump’s visit to Brussels, and then the NATO summit in Italy.
Second, the IMF mission to discuss the fourth review is in town at present, likely with the focus being government plans for pension and land reform. T
The cabinet seemed to sign off on pension reform, and plans are likely to be sent to the Rada, assuming the IMF gives the green light (not a done deal).
On land reform the government seems to be holding back revealing details. Meanwhile Yulia Tymoshenko seems to be on the warpath on this one, starting a petition against the reform, which has thus far raised 250,000 signatures, with a plan to gain 10 million, and to push for a referendum.
Not sure how this would work in Ukraine – but it will make life very difficult for the government if it tried to table any such a reform at the Rada.
On this note, the Rada returned from its Easter break, and has been focusing on lots of populist/security stuff – like various Russian social media bans.
As yet, the Volodymyr Groysman government/coalition seems still to be struggling to reveal a working majority in parliament, which suggests a tough ask to get either pension or land reform on the statute book by the end of July recess as likely demanded by the IMF.
Tymoshenko might still use the land issue to call a vote of no confidence in the Groysman government – waiting for the time of optimal political tensions domestically, and land reform efforts could do the trick.
Third, amid the looming Stockholm arbitration case decision between Naftogas and Gazprom, for tens of billions of dollars either way, Russia is threatening to lodge formal complaints with the World Trade Organization over trade restrictions imposed on Russian trade/transit – albeit Ukraine likely will play the war/complicit clause in its defense.
Meanwhile, the Ukrainians seems to be further tightening restrictions on Russian transit trade through Ukraine – all told makes for a difficult trading environment just as trade data shows a pick-up both in overall trade turnover and specifically with Russia, as both sides have learned to live with the current status quo, and I guess business for oligarchs, is after all business.
Fourth, talking about business, I did smile at the strategy plan released by Serhiy Taruta, which suggested that Ukraine’s GDP could reach $750 billion a decade from now, a ten-fold increase, with real GDP growth of 10% per year. The base is admittedly very low, but unless Ukraine strikes gold, oil, or gas, or gets the green light for European Union accession, I cannot see any chance of Ukraine getting anywhere close to this.
Even thinking of say Russia’s recovery from the 1998 crisis, or Turkey’s from 2000/01, these credits only saw dollar GDP increase 4x in the case of Turkey ($200 billion in 2001 to $832 billion in 2011) in the decade following, and 6.5 times in the decade following the crisis in Russia ($210bn in 1999, to $1.3 trillion in 2009).
Russia benefited herein as well from the commodity super cycle, with oil prices rallying from $20 a barrel to nearer to $100. Taruta clearly knows something that that the rest of the economics profession have yet to discover. But note that he has recently allied with Tymoshenko in the more populist opposition camp, and likely is suggesting a different economic course, with Ukraine likely going off track with the IMF.
