Executive Search in Ukraine – 2021 Outlook

Virus Adds To Habitual Instability

Instability, habitual for Ukraine, is intensified by the Coronavirus crisis

A long lockdown in Ukraine, typical of those around the world as a whole, resulted in a decrease of about 5.5-6% in GDP. The key factors of the fall are a decrease in domestic demand due to the pandemic and  a decrease in investment and foreign trade.

The drivers of the Ukrainian economy – industrial production and agriculture – fell by 7% and 13.1%, respectively, in the first three quarters of 2020. Agribusiness was also impacted by poor harvests of corn, sunflower, soybeans, and sugar beets.

At the same time, the construction and trade markets have grown.

The IT sector resumed its growth in the 3rd quarter, but showed weak dynamics compared to previous years. Expectations in this market are positive – the Ukrainian government has made several stimulating decisions  to attract IT specialists from neighboring Belarus.

The lockdown has hurt in particular small businesses and a number of service and entertainment industries. We have also seen the return home of labor migrants, which means a sharp decline in remittances from abroad.

The uncertainty in negotiations with the IMF and vague prospects for obtaining new loans adds to the instability of Ukraine. The state budget is being run with a deficit. Due to the quarantine, the planned privatization of 5 large enterprises and 300 medium and small state enterprises did not take place in full. The unemployment rate in January-October 2020 increased from 8.5% to 9.2%.  By the end of the year, 1.7 million Ukrainians were unemployed.

Forecast

The Ukrainian economy is traditionally export-oriented, so its development depends on the situation in world markets. Just over 41% of Ukraine’s external turnover falls on the EU countries, but China’s share is growing.

In 2021, an agricultural land market should open in Ukraine. However, there are a number of factors that can prevent this from happening.  Many experts think that the law in its current form does not solve the main task of the land reform – attracting investments in the agricultural sector – due to the numerous restrictions specified. It complicates land transactions even for banks, not to mention foreign investors.

This is beneficial to those holding land in large estates who are likely to buy vacant agricultural land. Despite this, the creation of a land market in Ukraine will have a positive effect on the country’s GDP and will expand access to finance for small and medium-sized farmers. This, in turn, will allow modernizing technologies and increasing the output of products with higher added value.

It is possible we may see a revival in aviation production in Ukraine. The State Program for the Development of the Aviation Industry until 2030 provides for financing the aviation industry in the amount of UAH 2 billion (70.6 million US dollars) per year, a gradual restoration of civil aircraft production and the development of helicopter production.

The innovation and technology business has good prospects that the government has placed among its top priorities. Many solutions are aimed at creating favorable conditions for the IT industry, in terms of simplifying taxation, liberalizing labor relations, and strengthening protection against unlawful interference in the work of IT companies.

 

Contact the author Anna Nesterchuk at anna-nesterchuk@cornerstone-group.com

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