Ukraine’s new president, Petro Poroshenko, has vowed to make his first goal in office to bring the unrest in the east of the country to a close and address the countries economy.
The pro-European businessman won the presidential election with 54 percent of the vote, clearing the 50 percent threshold to win outright without a second round. The former Prime Minister, Yulia Tymoshenko, was trailing far behind, with about 13 percent.
Mr. Poroshenko also promised to mend ties with the Kremlin, citing his business connections to Russia, as well as his personal relationship with President Vladimir V. Putin; who has promised to respect the Ukrainian election results. He is a billionaire chocolate manufacturer and media mogul, who has aspirations of an alliance with the European Union, plus huge commercial interests in Russia. His ties, to both Russian oligarchs and Ukraine’s business elite, are believed to be an advantage as he tries to keep the economy operating.
The lowering of tensions, at least at the diplomatic level, appears to have reduced the chances of the European Union increasing its economic sanctions from the West on Russia. The main challenges for Mr. Poroshenko are: to encourage the people of Ukraine to visit more cafes and hairdressers; to improve vacancy rates in hotels. Also, to work with taxi drivers to improve their tariffs,by making gas prices more affordable; therefore increasing the amount of passengers to serve. Mr. Poroshenko aims to regulate suitable pension payment plans for the retired community, so that it reflects the rate of inflation. The country’s birth rate needs improvement and research needs to go into decreasing the country’s deceased rate.
World Bank economists expect the economy in Ukraine to recover slightly this year. According to the World Bank: “Ukraine has tremendous agricultural potential, this potential can be fully exploited in future years”.
In 2012, Ukrainian agricultural exports increased by nearly 40 percent to $17 billion, according to Mykola Prysyazhnyuk, the Ukrainian Minister of Agrarian Policy and Food. In 2013, corn exports grew by one-third from the previous year. In addition last Wednesday, Ukraine’s interim Prime Minister, Serhiy Arbuzov, said the country plans to increase its foreign exchange reserves this year with $20 billion of agricultural products.
While a part of the Soviet Union, the Ukrainian economy evolved from an agricultural foundation to an industrial one. After the USSR’s seperation, Ukraine began evolving into a services economy. Today, the services sector is Ukraine’s fastest-growing sector, growing an average 8.7 percent from 2004 to 2012, according to the Kiev-based CFC Consulting Company.
In 2012, about 68 percent of the Ukrainian labour force worked in the services sector, mainly transport, post and telecommunication; and accounted for 59 percent of GDP, according to the CIA’s World Factbook.
The country’s IT services are particularly strong, ranking fourth in the world for the number of IT specialists, behind the U.S., India and Russia. Despite Ukraine’s population being one-third of the size Russia it still managed to achieve this ranking, according to a summer 2013 report by the Ukrainian Hi-Tech Initiative.
To counter demand for more political change, Mr. Poroshenko said he would push for early parliamentary elections this year; answering a demand by critics of the Yanukovych government, who have advocated more political change.
At the start of the month, the International Monetary Fund (IMF) approved a $17.1bn (£10.1bn) bailout for Ukraine to help the country’s economy. The money will be released over two years, with the first installment of $3.2bn available immediately. The IMF bailout will also make available $1bn in loan guarantees from the US, which was recently approved by Congress. This should help some the current economic challenges across Ukraine.
The US Treasury Secretary, Jacob Lew, stated that the bailout will “enable Ukraine to build on the progress already achieved to overcome deep-seated economic challenges and help the country return to a path of economic stability and growth”.
What are the productive outcomes for the rest of Europe from a more stable political and economic footing in Ukraine?