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30 July 2014 10:02

Expert estimates losses of Ukrainian economy due to political instability

KYIV, December 2 /Ukrinform/. Losses of the Ukrainian economy in case it comes to a standstill due to instability in the country may reach USD 0.5 billion daily.

Executive Director of the International Bleyzer Foundation Oleh Ustenko has said about this in comments to Ukrinform.

“Ukraine produces about USD 0.5 billion of GDP a day. In case the economy comes to a complete standstill, the daily loss can make up just this amount. Political instability, which is now, and shutdown of the part of enterprises does not mean that the losses will be so great, but it is clear that they will be,” the expert said.

At the same time, Ustenko noted that if political instability in the country will continue for a long period, economic risks will deepen.

“Cold economic calculation shows that the suspension of the real economy due to any causes, not only political instability, leads to an increase in unemployment. Since the unemployment rate will not increase over one or two days. But if the strike lasts for a long period of time, the consequences can be significant and it will not be easy for the real sector to recover," Ustenko said.

In addition, according to him, due to political instability, it will be difficult for Ukrainian private business to refinance its foreign debts.

“Total volume of foreign debt of Ukrainian private business exceeds USD 100 billion. Those debts have been formed over 2006-2008, as short-term, and they do not need constant refinancing. Any political risks in any country are perceived by creditors very negatively. Therefore, it will be difficult for Ukrainian private companies to re-credit in the planned volume and the cost of borrowings will increase,” the expert explained.

At the same time, Ustenko noted that risks related to debt obligations of private companies will grow if the situation fails to stabilize in the country over a short-term perspective.

“Just these risks are put to the first place by many creditors and will be considered as more important against macroeconomic risks,” he believes.

In addition, the economist thinks that investment risks are waiting for the country as a result of such cataclysms. “For instance, those who are engaged in so-called “portfolio investments, will hinder their investment. But the most dangerous is when they start withdrawing money from Ukraine. “The flight of portfolio investors” is typical for any country experiencing political cataclysms.”

Ustenko added that continuous political instability will have a bad impact on the inflow of foreign investment in Ukraine.

“Potentially, a part of direct foreign investments could come to Ukraine, but for a short time, investors will put them on the waiting position. But if it drags on for a long period of time, the investment will go to another country, and Ukraine will lose additional investment inflows," the Executive Director of the International Bleyzer Foundation concluded.

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