How did the Ukrainian government react to the COVID-19 pandemic, particularly with regard to supporting small and medium enterprises? Have those measures been effective? And how can the EU assist Ukraine in the short to long-term in order to ensure its recovery and economic stability? Within the framework of the 20th Ukraine Breakfast Debate on the topic “COVID-19 in Ukraine: Economic Consequences for Foreign Investment and Local Businesses”, which took place on Thursday, November 5, 2020, experts and participants jointly tried to answer these questions. Once more conducted as a virtual event, the debate confirmed the relevance of regular exchanges on current issues in the German-Ukrainian context.
The Breakfast Debate was opened by IEP Director Dr Katrin Böttger with a welcome speech on the importance of German-Ukrainian bilateral exchange, especially in times of COVID-19. It was followed by short inputs on the micro-and macroeconomic situation in Ukraine, provided by our guest speakers Oksana Kuziakiv, Jean-Erik de Zagon and Robert Kirchner. Oksana Kuziakiv is the Chief Executive at the Institute for Economic Research and Policy Consulting (IER) and Jean-Erik de Zagon is the Head of Representation at the European Investment Bank (IEB) in Kyiv. Our third and last speaker was Robert Kirchner, Deputy Team Leader at Berlin Economics. Following these three input presentations, the participants engaged in a lively discussion about COVID-19 countermeasures and their impact on the business climate in Ukraine.
The Ukrainian economy, which has made significant progress since 2015, has been hit severely by the COVID-19 pandemic with a predicted GDP decline of 7% for 2020. The country will be in need of international assistance to overcome the current crisis. The experts pointed out that Ukraine had been on a good track before: Ukraine was able to reduce interest rates from 11% in 2018 to less than 6% in 2019 while Foreign Direct Investments (FDIs) have been increasing slowly but steadily since 2015. However, especially when quarantine measures were announced in the spring of 2020, progress made in recent years started to vanish.
Nonetheless, in October 2020 the outlook was not as bad as expected: Some sectors, for example the retail industry returned to strength and posted double-digit growth rates. Other sectors performed less well, as the industrial production’s output remained lower than 2019 due to the lack of foreign demand and unfavorable conditions for agricultural production. However, when being asked about the future of their enterprises, most entrepreneurs remain positive and expect the crisis to end within the next two years.
Reasons that were given to explain the generally optimistic prospect directly referred to national and international financial aid measures and policies: Firstly, the Ukrainian government provided a number of business support programs such as temporal suspension of loan repayments (March until May 2020), tax preferences and direct financial support. Secondly, the European Investment Bank (EIB) invested in Ukraine’s infrastructure through programs that aim to modernize the country and reallocate existing loans. In addition to that, the Deep and Comprehensive Free Trade Area (DCFTA) and the subsequent increase in trade with the EU and Germany was presented as a success story.
The 20th Ukraine Breakfast Debate took place within the framework of the “German Ukrainian Researchers Network” project (GURN 1, 2019-2020) and was conducted in close cooperation with the European Investment Bank (EIB). The format has been continued since March 2021 as part of the GURN 2 project and is funded by the Federal Foreign Office.