This is a curated list of the biggest economic news of Ukraine in the past week.
The news this week has not been good for Ukraine. Nord Stream 2 is almost completed and Ukraine is back in recession.
With inflation in the double digits and higher interest rates, the Ukrainian economy has went back to recession, according to Bloomberg. According to the well respected news site, the GDP of Ukraine decreased by 0.8 percent in the second quarter compared to last year.
“While new Covid-19 infections have stabilized and most restrictions to stem the disease’s spread were lifted in May, Ukrainians have endured one of Europe’s slowest vaccination campaigns, holding back a rebound economists expected to be driven by consumers and agriculture,” Bloomberg points out.
While Bloomberg is talking about a recession in the Ukrainian economy and problems with the pandemic, the Ukrainian Ministry of Economy talks about growth. In a statement, the ministry says that the Ukrainian economy experienced 5.4 percent growth in the second quarter, compared to the same period last year.
“We are seeing a recovery in the manufacturing sector; all types of economic activity are showing growth, except for agriculture. These factors will compensate for the current lag in economic development and maintain a positive trend until the end of the year. Our goal is to grow GDP by 4 percent,” said Minister of Economy Oleksiy Lyubchenko and stated that the Ukrainian government has done everything to better the economy.
Any day now
The vaccination process in Ukraine has seen a lift off unlike before in recent time. The government is pushing for vaccination to control the virus and prevent a new lockdown in the future. In the beginning, vaccination was slow due to the lack of vaccines, vaccine scepticism, and inefficiency, which lead the government to change the ministry of health earlier this year.
7.2 million Ukrainians have received at least the first dose of the vaccine at this point, while the number of fully vaccinated people is 2.6 million people. Ukraine is vaccinating around 160,000 people per day. Like in other countries, Ukraine has opened for vaccination in segments, allowing the most vulnerable, healthcare workers and military, to be vaccinated first. From July 21st, Ukraine, however, went into a new phase.
Health Minister Viktor Lyashko revealed that every adult Ukrainian now can get the vaccine at any of the vaccination centers around the country. Ukraine is currently vaccinating with Pfizer, Sinovac, Moderna, and AstraZeneca. Vaccination with Johnson & Johnson will also begin shortly, according to the health authorities.
Nord Stream 2 is almost finished
On Monday, it seems like, the Nord Stream 2 project will be completed and the gas pipeline from Russia to Germany will be a reality. This will be expensive for Ukraine, as Russia has been dependent on Ukraine for gas transits. Each year, Ukraine is set to lose around 1.5 billion USD in transit fees.
Nord Stream 2 has been championed by Russia and Germany in spite of loud criticism from Ukraine, Lithuania, Poland and the US. Denmark has cooperated with Russia and Germany, allowing the pipeline to be built partly in the Danish territorial waters of the Baltic Sea. Together with the already existing Nord Stream 1, the two pipelines will be able to transport 110 billion cubic metres of gas annually.
More American cooperation
The Ukrainian Minister of Economy Oleksiy Lyubchenko said that Ukraine is seeking a free trade agreement with the US. President Volodymyr Zelensky will push for the deal when he is meeting the American President Joe Biden in the White House on August 30, he added.
“Ukraine is now trying to focus on its national interests, being open to all countries with which the vectors of development coincide. Finally, we have a strategy, based on which we have identified growth points, we also have a Budget Declaration and a forecast of socio-economic development for three years, clear trends,” said Lyubchenko, but did not reveal how far negotiations are with the U.S at this point.
“At all meetings with representatives of foreign countries, we repeat: Ukraine, like every country, has its own vectors of development. If they intersect, there will be synergy and results for both countries,” he added.
Diia City might be a reality soon
Recently, Ukrainian President Volodymyr Zelensky signed the new law “On Stimulating the Development of the Digital Economy in Ukraine,” which will set up the digital framework Diia City to create even better conditions for the Ukrainian IT sector, such as providing a legal framework to protect the industry and low taxes.
According to the bill, Diia City will have a five percent income tax but additional taxes for social assistance and the military. In addition, Diia City will, among other things, introduce a zero percent tax on income if the amount is instead invested in a Ukrainian startup company. In addition, Diia City will give its “residents” a special status, which will protect them from corruption and investigations from, among other things, tax organs.
While that all sounds great, IT Ukraine fears that taxes will increase over time. Ukrainian freelance IT workers already pay a low 5 percent income tax in Ukraine, much lower than the regular income tax of about 18 percent. However, several politicians are interested in increasing that tax to 10 or 15 percent for IT workers.
Andreas Flodström, founder and CEO of the Swedish IT company Beetroot in Ukraine, recently told Ukrainenu that he has mixed opinions about Diia City.
“I have somewhat mixed views. I think there is an open dialogue between the industry and the ministry, and I am sure they have the industry’s best interests in mind. The industry is often opposed to change, but I am still optimistic, but I share the concern about whether there will be too much regulation,” he said.
Of the many companies in the Ukrainian IT sector, a few has been valued over one billion USD. This just happened to the startup People.ai. More examples of companies like People.ai can be found if you follow the link above.
“I’m thrilled to share @ppl_ai has reached a $1.1 billion valuation w/a $100 million series D funding round. With revenue operations & intelligence gaining momentum, we’re primed to lead the industry,” wrote the company’s founder Oleg Rogynsky on Twitter.
People.ai has become successful after developing a program that can help companies find new clients, analyze sales, forecast sales, and even close deals. Among its customers are companies such as Zoom and Lyft, and the company is expecting to use the new investments to expand into new markets and develop its products.
The tourists are back
If you have taken a walk in the center of Kyiv recently, you might have noticed that the tourists are back. A lot of people have come from the Arab countries, but everywhere you can hear languages not familiar in Ukraine. Around 32,000 tourists have visited Chernobyl this year, which is about the same amount as last year.
“We have already managed to get better results than in 2018 when we received 36,000 tourists for the whole year, but we are unlikely to achieve the results of 2019, with 124,000 tourists,” said Kyrylo Harnyk, assistant director of the state enterprise Center for Organizational, Technical and Information Support of the Exclusion Zone Management (COTIS), during a roundtable talk on the preservation of the zone.
The authorities are now working to make Chernobyl an UNESCO site. Ukraine is also fighting to get the site on the UNESCO world heritage list – a list of sites that should be protected as they have an interest for not only a single people, but all of mankind.
If you have already seen Chernobyl, this week we could also recommend the Ukrainian Bahamas for a visit: