‘Scenarios for Ukraine’ at the EBRD

By Alicia Benito-Martinez

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Ukraine’s long-term development and related policy challenges were the focus of a ‘Scenarios for Ukraine’ workshop hosted by the EBRD together with the World Economic Forum (WEF) earlier this month.

The ’Scenarios for Ukraine’ project is especially timely after the country’s recent deep crisis and five years of slow growth. Its per capita income remains at a fraction of the EU average.

Ukraine implemented many first-generation economic reforms, such as liberalisation of prices, trade and foreign exchange markets and privatisation, over a decade ago. However, deeper institutional reforms never materialised, even after the mass protests that led to the ‘Orange Revolution’ of 2004 and 2005.

As Ukrainian authorities debate whether to sign an association agreement with the EU or join a customs union with Russia, Belarus and Kazakhstan, the ‘Scenarios for Ukraine’ project serves as an ideal platform for domestic and international stakeholders to discuss the country’s future.

The workshop, held on 2 September 2013, attracted an audience from the public and private sectors, academia and civil society as well as members of the WEF’s Global Agenda for Ukraine. It was conducted under Chatham House rules but some EBRD representatives have allowed their contributions to be reported.

“Ukraine presents a big puzzle for the researchers of transition: the country experience significant degree of political openness, but virtually no convergence with more advanced economies over the past two decades,” said Jeromin Zettelmeyer, the EBRD’s Deputy Chief Economist, in his introductory remarks.

“Over this period its peers’ per capita income converged with EU’s average by around 20 percentage points. In the post-crisis world where investors exercise greater selectivity in terms of political and economic institutions, Ukraine is in a difficult position. Without reforms, it will likely fall even further behind”.

Scenarios discussed in the meeting included likely external developments to affect Ukraine over the longer term and domestic reform paths as well as their possible outcomes.

Subjects such as the competitiveness of Ukraine’s traditional sectors, the future of the energy markets, its potential to open new markets in Europe and beyond and the reform experiences of countries that have recently gone through major transformations (such as Turkey) were also explored in depth.

The discussion yielded expert insights into and summaries of the potential implications of scenarios that could inform a report to be prepared by the WEF team and shared with the Ukrainian government and wider community later this year.

Alex Pivovarsky from the EBRD, highlighted the importance of the current debate on Ukraine’s strategic options, as the government, elites and society at large face the choice of either continuing with the existing economic model of low value-added industrial production or launching major institutional reforms.

Ukraine is the second largest country by asset size among the EBRD’s over thirty countries of operation. The Bank is one of its largest foreign investors and, as such, is pleased to play an active role in dialogue about its economic development and growth.

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