Vasyl Myroshnychenko: Saving people and the economy

As a student of international political economy at the London School of Economics 14 years ago, I played a simulation G8 game organized by our professor of economic diplomacy. The case we played was a flu pandemic and how the most developed countries could solve the issue. International political economy literature abounds with information about how a pandemic can bring down the entire global economy. For the world economy to crumble, the death toll should reach around one billion people. The outbreak of the coronavirus is ominous, but probably not that fatal to the world economy. However, the global economic outlook is quite dismal given the situation in the U.S. stock market, the plummeting prices for crude oil and other commodities and all other detrimental implications caused by the uncertainty.

Ukraine’s economy, which is heavily reliant on the export of commodities, will be hit hard.

The U.S. Congress is considering injecting $1.8 trillion into its economy to halt the economic decline. Rich countries are ready to go over and beyond what is expected in a free market economy. The United Kingdom government, for instance, will cover 80% of the salaries of retained employees of up to 2,500 British pounds per month and will disburse 1 billion to support renters who are losing income. It will also introduce interest-free, 12 months business interruption loans to affected businesses and up to 25,000 British pounds of grants for small businesses.

Ukraine’s government has so far announced to lift a monthly social security tax for the self-employed ($38 now); cancel the payment of the tax on commercial real estate and land; delay the compulsory introduction of cash registers for small businesses; define COVID-19 quarantine as a force-majeure for legal contracts; temporarily stop tax inspections of businesses and expand the government program of affordable bank loans at a discounted interest rate for businesses.

Needless to say, the Ukrainian government cannot compete with the governments of the developed nations. Moreover, it is now swamped with tackling the spread of the virus from the view of public health. Saving the economy should be simultaneous to saving people’s lives. The previous government of Oleksiy Honcharuk pursued a goal of attracting $50 billion and securing 40% gross domestic product growth in five years. I hope the government of Prime Minister Denys Shmyhal will endorse the plan of his predecessor and will soon present his vision of how to achieve it.

The pandemic which started in China has disrupted supply chains for many American and European companies. It prompted many to question the sustainability of heavy dependence on production in China. Ukraine should jump on this opportunity and offer our country as a production hub for the European Union. Moreover, Ukraine should continue its cooperation with the International Monetary Fund to survive the pending macroeconomic challenges. The new government should design and execute an efficient program of attracting foreign direct investment, creating financial schemes to boost exports and finally reform Ukraine’s judiciary, which is paramount for both national and international businesses as well as new investors.

Vasyl Myroshnychenko a partner with CFC Big Ideas, a strategic communications company.