Belarus, Moldova, Ukraine. Macroeconomic Report
Belarus, Moldova, Ukraine. Macroeconomic Report

Author(s): Vitaliy Kravchuk, Malgorzata McKenzie, Mykola Ryzhenkov
Subject(s): Politics, Supranational / Global Economy, Economic policy, International relations/trade
Published by: Research Center of the Slovak Foreign Policy Association (RC SFPA)
Keywords: Belarus; Moldova; Ukraine; Macroeconomy; Report;
Summary/Abstract: This is the first report of the project on vulnerable sectors in the Eastern Partnership (EP) countries. Its aim is to provide a macroeconomic setting for future structural reports. It also provides a toolkit for the sectoral reports in the sense that it offers a set of macroeconomic points of reference. Whenever possible, we try to identify the vulnerable sectors themselves. By vulnerable sectors we mean sectors with the following attributes: (1) significant input into GDP, (2) high or almost exclusive dependence on domestic/CIS markets, and high level of integration into post-Soviet value chains, (3) declining competitiveness. The reason for this is dictated by the wider aims of the whole project, which are, among others, to raise public awareness of the actual problems faced by these declining sectors and to provide a detailed account of how the management of these sectors may affect social sustainability in the modernization of the respective EP countries. Notwithstanding the focus on the designated economic sectors, the report covers the usual aspects of macroeconomic policies. It starts with a discussion of the economic development of Belarus, Moldova and Ukraine since the early 2000s, expounding on how demand has contributed to growth (or decline). This is followed by an analysis of production trends, which singles out some of the vulnerable sectors. Public finances and labor markets are discussed next. As the next step, we perform a detailed analysis of trade in merchandise and balance of payments. Monetary and exchange rate policies are reviewed next. We also formulate projections for the near future and conclude with policy recommendations. Although the report often looks back to the early 2000s or even earlier, we focus mostly on the period after 2009. The countries in focus were hit hard during the 2008-2009 financial crisis, which exposed the previously hidden problems of their vulnerable economic sectors. Thus the crisis provides a natural starting point for the analysis. We try to show how the EU Eastern partners dealt with the post-crisis challenges. While doing this, we also try to assess how macroeconomic imbalances can be managed and what their implications are for economic policies. As of this writing, Ukraine is plunging into a period of deep macroeconomic instability, creating a situation that adversely affects Belarus and Moldova as well. To even contemplate economic recovery in the region, ending the territorial dispute between Russian and Ukraine is the first essential step. However, we must set aside this political issue to focus on identifying the necessary steps in the sphere of economic policy.

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