Why investors are disappointed in Ukraine

The mood of the business affected by the weak judicial system, corruption, shadow economy and the pressure on the national Bank.

The investment attractiveness index of Ukraine has fallen for the second year in a row. In the first half of 2020, the index fell 2.5 points out of five and is in the negative plane. In six months the index lost 0.44 points.

The mood of investors affected by the weak judicial system, corruption, shadow economy and the pressure on the national Bank. The index was calculated before the resignation of the Governor of Yakov Smoliy. Корреспондент.net tells details.

More pessimism

The European Business Association published a study which States that 62 percent of surveyed CEOs believe the investment climate in Ukraine is unfavorable.

34% call it neutral and only four per cent favorable. Note that last year the investment climate in Ukraine was considered favorable 17%.

On the negative trends evidenced by the assessment of the dynamics of the business climate, 55 percent of top managers say about the deterioration of the investment climate compared to the previous half year.

35 percent of respondents “tops” confident that the business environment has not changed, and only ten percent believe they have improved somewhat.

Почему инвесторы разочаровываются в Украине

The index of investment attractiveness of Ukraine for 2012-2020 years

As the Executive Director of the EBA Anna Derevyanko, falling to 2.51 per cent is unprecedented deterioration in investor sentiment, which is comparable to the post-crisis mood of 2015.

Positive aspects of business called the launch of the land market, foreign exchange liberalization, continued cooperation with the International monetary Fund, interest rates decline, the national Bank, a stable hryvnia exchange rate.

Negative factors proved to be much more. It is the traditional lack of progress in the fight against corruption, a significant impact of the shadow economy and weak judicial system which deter investors from Ukraine.

It was added to the quarantine for pandemic coronavirus and became a regular reshuffle in the Cabinet, which led to political and economic instability and increasing tax burden and changes in tax law, the suspension of the reforms.

As for predictions for the next six months in 2020, 44 per cent of respondents genderof do not expect any changes.

Due to possible deterioration of terms of experiencing 41 percent. While 15 per cent hope to improve the climate for business. Note that in the previous survey, optimists were more than 40 percent.

The pressure on the NBU deters

At the end of last month in the EBA said that trigonom the signal that sends to businesses and investors support the relevant Committee of the Verkhovna Rada of the draft resolution on the assessment of the NBU.

The document contains a recommendation to investigate the activities of the National Bank and the Deposit guarantee Fund of individuals from 2014 to 2019.

As noted in the EBA, they share the statement of the group of seven, which States that an independent national Bank became one of the most important reforms that helped to achieve macro-financial stability, to overcome the banking crisis and restore confidence in the sector.

The Association noted that such actions of the government become a destabilizing factor for the investment activity and economic growth.

July 1, Yakov Smoliy said that resigns from his post as head of the national Bank of “systematic political pressure” from the authorities. According to him, the leadership of the regulator is under pressure for a year.

“Lawmakers want to disrupt the cooperation with the IMF… And want to “help” in the struggle for PrivatBank”, — he said.

Today, July 3, the Verkhovna Rada accepted the resignation Smoliy.As the new head of the Central Bank is not assigned, temporarily it will be headed by first Deputy Ekaterina Rozhkova.

In the EBA noted that the pressure on the NBU is a negative signal for foreign investors and international companies operating in Ukraine, “because questioning the security, justice and equality before the law in Ukraine.”

Executive Director UkraineInvest Michael has Baccala noted that at the beginning of this year has been a big interest in Ukraine, then everything stopped because of the coronavirus, and now investors revise their intentions due to the slowdown in reforms, says DW.

Executive Director of the Center for economic strategy Hlib Vyshlinsky explained that investors are deterred by “the sabotage of the judicial and law enforcement reforms, the undermining of the most successful institutions and macroeconomic stability, and the unpredictability, incoherence and a very low quality of personnel policy.”

Gendir Ukraine’s largest investment company Dragon Capital Tomas Fiala said that investor confidence in the independence of the NBU undermined.

“There remains negative residue concerning precedent when elected for seven years Chairman of the national Bank, can be fired on a call with Bank (Office of the President — ed.), if it is something not like his activities,” said Fiala.