World crisis: economist gave five tips Ukraine

The spread of coronavirus in the world served as a trigger for the start of the financial crisis. Because of the negative expectations of investors, record oil prices dropped, collapsed stock exchange, slipped the tourism sector, the industry and consumer demand. This situation means that more people may find themselves in a difficult financial situation, believes Professor of Economics at the University of California at Berkeley, member of VoxUkraine Yuriy Gorodnichenko.

Мировой кризис: экономист дал пять советов Украине

The economist is sure that Ukraine can survive the current crisis with the least losses. However, in his opinion, the authorities need to take a few important steps:

  • To give the national currency to gradually devalue the same time avoiding panic on the currency market.

“During this period, the NBU should perform their function of borrower of last resort for the banks, because there is a great risk that they will be under pressure if they attempt to remove deposits and convert them into foreign currency. Panic wave can cause a sharp drop in the hryvnia, the NBU therefore absolutely sells currency reserves, moderating fluctuations”, – explained Gorodnichenko.

  • The government may introduce some short-term support measures for industries that are most affected by the crisis: tax breaks, loans and the like.

“However, direct purchases of products intended for export is a bad idea,” – said the economist.

  • To conduct countercyclical fiscal policy.

“Not to walk “all”, when there is money to save in a crisis, and Vice versa: in good years to create a margin of safety, and bad – to maintain at its expense business and people. Today, during the crisis, the government must increase their spending to make more purchases (one of the areas can be purchase of medical services, tests, equipment), transfers, temporarily reduce taxes for households and business. However, this requires external borrowing, which in case of default,” warned the expert.

  • Urgently to resume cooperation with the IMF, which will allow you to obtain financing from other international institutions.
  • To provide social support to the most vulnerable citizens – seniors, the unemployed, the sick.

“This will allow them to survive the most severe phase of the crisis and support small and medium business through the creation of demand for its products”, – summed up Gorodnichenko.

He said that large economic shocks can be advantages. So, crises can become growth point for certain industries (online and services delivery), to improve the quality of medical care in Ukraine (through a one-time purchase of quality equipment and training additional staff) and create new useful social
rules (distribution of hygienic practices and practices of remote work).