Cabinet is satisfied with its performance and the economy

The Yanukovych government has against all odds set a new economic growth record. After lengthy recounts and revisions it has transpired that Ukraine’s GDP rose by 9.3% in 2003, thus outstripping by 0.3% the results of 2001, when the Yushchenko government achieved a 9% economic growth rate. Although these figures are no more than dry statistics for the absolute majority of Ukrainians, achieving a record growth rate was obviously a matter of principle for the current cabinet. Last January, when the State Statistics Committee reported 8.5% GDP growth, First Vice Premier Mykola Azarov rushed to state that this figure was subject to adjustment and would certainly exceed 9%. Happen it did, and the Ministry of the Economy deserves the credit for this.

An indisputable achievement of the current cabinet are the structural changes in the nation’s economy. Economic growth is led by machine building, its output up by a third in 2003. And although the country’s main industrial power still lies in the production of simple metal products, turbulent growth in high-tech sectors inspires optimism. The most energetically developing is Ukraine’s construction sector, which expanded by 23% in 2003. The staggering development of this sector also hints at an overall economic recovery. The profitability of the construction business looks outrageously high. Yet great demand for new apartments continues to stimulate higher prices for housing. Moreover, it is evidence of the real improvements in Ukrainians’ welfare.

In a comment on the economic results of 2003, Premier Yanukovych called the performance of his government successful. Among the major successes he named the creation of a coalition with the parliamentary majority and “virtually complete fulfillment of his program.” He further said that changes in the cabinet should be expected soon, which obviously surprised faction leaders who have their representatives in the cabinet. It will be recalled that the latest replacement of former Economy Minister Valery Khoroshkovsky with Mykola Derkach did not pass without difficulty, which was precisely because this decision had not been fully coordinated with one of the majority factions. Thus far there are no rumors among the lawmakers about the next minister to be replaced.

As for the complete fulfillment of the government program, the premier has obviously exaggerated the government’s performance. Should you bother to check on the promises made by the government a year ago you will see that this statement is somewhat rash. Of the most pressing problems the government has thus far failed — contrary to its promises — to eliminate the red tape involving the registration of small businesses. Moreover, the cabinet has not ventured to impose restrictions on the country’s natural monopolies in what concerns price formation. By the end of 2003 independent commissions were to be created to coordinate the pricing policy of the biggest state monopolies. Yet the premier is obviously not omnipotent despite his power and charisma. Exporters are yet to see the “effective measures” to repay the state’s arrears on VAT returns. Meanwhile, Ukraine’s business as a whole has waited in vain for the cabinet to come up with its promised transition period program on the eve of Ukraine’s accession to the WTO. To all appearances, everyone will have to fend for himself once Ukraine joins the WTO. The cabinet has failed to achieve the promised 3.5% growth in agriculture. Likewise, the Eurasian Oil Transport Corridor has not been launched despite the government’s explicit promise to do so.

As for the percentage of fulfillment of the government’s program, one might say that the greater part has been fulfilled, which is in principle a good result in itself. After all, the government promised 5% GDP growth and managed to achieve 9.3%. It promised 5% higher exports, which in fact rose by almost 30%. It promised a $1 billion foreign investment increment, which was achieved in only nine months. Some tax cuts have been made. But most importantly, Ukrainians’ real wages and salaries rose by 15% as promised. Thus, the government can join the election campaign with confidence, if, of course, the premier is nominated as the presidential candidate from the majority. Obviously, the number of votes garnered by the current premier this November will become the most objective evaluation of the nation’s economic progress. Despite all the bad press it has received, the Central Election Committee differs from the State Statistics Committee in what concerns calculation accuracy.