Page 40 - Eastern Europe Outlook 2020

in the general elections.
However, the really big political problem that Zelenskiy has to solve is how to break up the oligarch system that dominates the economy. The biggest businessmen have had two decades longer than their Russian peers to entrench themselves and will be difficult to control.
"Growth is held back by a weak business environment - with shortcomings in the legal framework, pervasive corruption, and large parts of the economy dominated by inefficient state-owned enterprises or by oligarchs - deterring competition and investment,” the IMF reported.
And Zelenskiy doesn't seem to be too interested in taking on this fight. The first thing his Russian counterpart Putin did on taking office in 2000 was to hold his infamous “oligarch meeting” where he promised the collected business leaders that they could keep what they had but had to stop the stealing.
There has been no corresponding meeting by Zelenskiy and indeed he has worried both the IMF and investors by failing to rein in oligarch Kolomoisky who is a personal friend and backed Zelenskiy’s election with his media empire. While Kolomoisky has caught the most attention, he is only part of a wider problem of the oligarchs’ deep hold on the biggest assets in the economy where their strategy has always been to seek rents from the state. This set-up stymies competition and investment and will hold Ukraine back.
But Ukraine has big ambitions and in theory it has to do very little to start a boom as from all the Commonwealth of Independent States (CIS) countries it is the only one with the bulk of the fast “catch-up growth” still ahead of it. If the virtuous circle of income rises-profit-investment can be made to turn then like Russia in the noughties the growth could be very strong.
The finance minister is optimistic and says that Ukraine should be able to wean itself off the IMF’s teat in the next three years. Ukraine should build EU-standard institutions and implement free-market changes with an eye to graduating out of IMF tutelage by the end of the Zelenskiy government, Finance Minister Oksana Markarova said: “My ambitious plan is to be able to finish so that in 2023 we will not have a question of when we will receive a new tranche, but we can provide for ourselves.The programme we are working on is good, and it will allow us to carry out a lot of reforms, privatisations, concessions and other things. But it should allow us to leave it at the end - as Poland was able to do in due course.”
3.0​ ​Macro Economy
Key economic figures and forecasts
2015 2016 2017 2018 2019e 2020f 2021f
Nominal GDP (EUR bn) 81.8 84.4 99.3 110.9 138.4 159.6 156.3
Real GDP (% yoy) -9.8 2.4 2.5 3.3 3.5 3.3 3.5
Industrial output (% yoy) -13 2.8 0.4 1.6 -1.4 1.2 2
40​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com