Massive decline in stock market indices due to the proliferation of Chinese coronavirus, forced to talk about a new financial crisis, President Vladimir Zelensky ordered the government to repay arrears of wages to the miners and to limit imports of coal, and the Cabinet announced a plan to support key sectors are the main economic news this week.
The last week of winter brought the Earth the bad news: the rapid spread of Chinese coronavirus, exciting new countries and regions, has led to panicked investors and brought down the indices of the global financial markets. The price of Brent crude oil on Friday for the first time since December 2018 fell below $ 50 per barrel. For the week the “black gold” fell by 14 percent, the biggest drop since 2011.
The Dow Jones Industrial Average, S&P 500, high-tech companies NASDAQ only Thursday fell more than four percent, but only for a week, the key indices of world stock exchanges fell by 11 percent, which was the worst figure since 2008.
The world started talking about a repeat of the global financial crisis. Trigger a new economic crisis became a confident stride across the planet Chinese coronavirus. Clearly, back in early February, American and European financiers have underestimated the impact of the disease, believing that the epidemic is confined to the second largest economy in the world – China. However, now the mood has changed dramatically. Everyone understood that COVID-19 will affect all countries and is likely to significantly alter our world.
And if the first sign of the onset of the global economic recession, economists have started to talk last summer, and now its appearance began to emerge at an alarming rate.
Many Ukrainians who remember the painful experience of the devaluation of 2008-2009, I ask the question now – how this crisis hit our country and their families? Is Ukraine ready, preserving critical dependence on world markets for a new challenge, whether she’s learned the lessons of the previous crisis?
Office Alexei Goncharuk, while public remains calm, saying he did not expect serious consequences for the domestic economy because of the epidemic of the coronavirus. About it this week said the Minister of economic development, trade and agriculture Tymofiy mylovanov.
“We do not expect significant problems for our chain of value creation is more likely to occur the higher prices of imports that, in General, good for the economy, especially for domestic producers”, – commented on the situation Milovanov.
According to him, the government is ready to respond to possible negative consequences of the epidemic with the help of state support, as well as greater coordination with tax and fiscal services, National Bank. In addition, the Cabinet is studying the experience of the struggle of the Central Bank of China with the economic consequences of a dangerous virus.
Milovanov said that a large part of our exports to China are corn and sunflower oil, iron ore and iron ore concentrates. In the first two positions Milovanov predicts export growth, and last – Ukraine will be able to sell them to other countries who want to increase metallurgical production.
With regard to imports of Chinese goods, consumer products, according to the Minister, it is possible to substitute domestic or European, and components and equipment products produced in the EU or other Asian countries.
But here the important question is – do the authorities the scale and severity of impending problems, which in the coming weeks, can grow like a snowball, and if they have the professionalism and competence to counter these threats?
Industry support, but over time
The fires of the global financial crisis poses to our economy, a particular threat because of the fact that in recent months Ukraine has seen a fall in industrial production. By the end of 2019, this important indicator fell by 1.8 percent after rising 1.1 percent in 2018.
This week the State statistics service released data for January. The decline in industrial production in the first month of 2020, though reduced your pace, after falling 8.3 percent in December, but still made an impressive 5.1 percent. Compared to December 2019, industrial production in January fell by 8.4 percent.
According to the state statistics service, the largest drop in annual terms was recorded in mining of coal and lignite – 19.2%, manufacture of basic pharmaceutical products and preparations – 14.7%, supply of electricity, gas, steam and air conditioned – 10.8%, machinery – 10.5%, in metallurgy – 10.3 percent.
Significant growth in annual terms was recorded in the chemical industry and the manufacture of computer, electronic and optical products, respectively, and 24.4 17.4 percent.
This negative trend makes to sound the alarm not only economists but also politicians. In Parliament talking about the need to revive the Ministry of industrial policy, and in the hearing of the report of the Cabinet of Ministers on its activities in 2019 reproached for absence of real steps to remedy the situation.
After such criticism, the Ministry of economic development, trade and agriculture this week decided to move back and presented a plan of state support in the years 2021-2023 the country’s priority industries.
According to the Minister Milovanova, in the preparation of a new three-year budget Declaration, the government intends to lay more than 90 billion for programs to support industry, agriculture and exports. The biggest amount of funds will go to support programs of the agricultural sector, on which over three years are invited to send a 45.5 billion.
To support the industry Ministry has allocated 32.6 billion UAH, in particular: 16.9 billion hryvnia for the development of aviation, 6 billion UAH for compensation of the purchase of production equipment to co-Finance projects smart specialization of regions is 6.8 billion, the creation of an energy efficiency Fund in the industry – 3 billion.
To support export it is planned to allocate within three years of 12.4 billion hryvnia, of which 6 billion UAH for compensation of credits to exporters 6 billion in the authorized capital of the Export credit Agency, 410 million UAH on support and promotion of exports.
“It is important to note that export support programs available, including the enterprises of the industry. Thus, the total amount of support for the industry can be increased,” the Minister added.
Needless to say that the mentioned amounts are not enough for the revival of national industry, but, unfortunately, in the current environment, these industries need to hope at least for the allocation of these funds.
Promises to the miners
This week once again reminded of a problem that remained unsolved all the years of independence of our country. We are talking about the problems of the Ukrainian coal industry.
For today the debts under the salary before miners exceed UAH 1 billion. This is despite the fact that in February the Cabinet has sent 163 million in payments to miners, and in December of last year is allocated from the state budget of 323 million.
On the last Tuesday of the all-Ukrainian conference of employees of the coal industry of Ukraine representatives of this sector said that in the regions of the catastrophic situation with the payment of salaries, as in some mines it is not paid for about five months. The miners also threatened to rally in the capital, if the debts are not paid.
Took part in the meeting, President Vladimir Zelensky instructed the government within two months to repay the debts under the salary to miners, Ministers threatening that otherwise they will have to opt out of receiving their salaries.
“Please in the next two months – March, April – to close all debts to miners. If not closed, then it will be fair if the government does not receive his salary for all these months,” – said the head of state.
This Zelensky did not stop, urging the Cabinet members to visit a mining town, to better understand the needs of the coal-mining regions. The President also instructed the Minister of energy and environmental protection Alexey Ariely to conduct personnel and financial audit of the coal enterprises and transfer information to law enforcement agencies.
Also on the instructions of the head of state the government should create a Focal point for the transformation of the coal mining industry.
It should be noted that at this meeting Zelensky gave the Cabinet of Ministers to restrict the import of electricity and coal, and to allow the importation not only produced in Ukraine coal brands, and provide domestic fuel guaranteed market.
In presenting his version of improvements in the industry, the President announced, in his words, “a great idea”, which caused a wide resonance in the society. Zelensky suggested the DTEK businessman Rinat Akhmetov, who owns and so the lion’s share of the national thermal power to buy the state company “Centrenergo” along with non-profit goehte.
“If you’re not ready, and the Antimonopoly Committee, as you say, is against it, I will talk to them, and they will be for. But it is not the question. You have to help us, too, then, to find partners like you, strong in this industry and find people who can privatize and invest in the modernization of mines. To help the state,” said Zelensky, referring to the General Director of DTEK Maxim Timchenko.
Apparently, the President’s proposal was too “generous” because Timchenko said that DTEK is not interested in the purchase of “Centrenergo”.
“I think we have enough heat generation. We have a priority – development investment in “green” generation. So we’re not going to participate in privatization. I think that we need new players to a live competition,” he added.
In the comments UNIAN Timchenko said that DTEK is also not interested in the privatization of unprofitable state mines.
“We have quite a large amount, today we produce about 80 percent of coal in the country, that’s enough,” said he.
Well, we can say that instead of systematic solution of problems of the coal industry, the state again decided to limit the budget handout.
Do not forget that Ukraine is now experiencing great problems with filling the state Treasury, because there is no guarantee of selection in the next two months billion hryvnia on repayment of debts to miners.
And it’s not just the limitations of the Treasury exacerbated the situation and reduced demand for mining significant quantities of coal in view of the warm winter and reduced industrial production. In connection with the reduction of the load on the thermal generation Minister Ariel a few weeks ago, acknowledged that Ukraine cannot implement all the extracted coal, so the industry needs a “comprehensive” reform.
By the way, the Ministry of energy in late January, published the draft concept of the “Green energy transition” of Ukraine up to 2050, whereby the share of renewable energy in the country’s energy needs by 2050 grow to 70 percent in the complete rejection of coal power. Whether there is in power a leader who wants to take on the role of British Prime Minister Margaret Thatcher, to solve problems of the coal industry in his country very radical way?
The week ahead promises to be busy economic news. The focus of all attention will also be coronavirus and its impact on the world and Ukrainian economy. In addition, from Tuesday the Verkhovna Rada returned to the consideration of the bill on the land market. While deputies examined nearly 1,200 amendments to the document, having a quarter of the way, so we expect the parliamentary hot days.