Friday, March 07, 2014

Tim Taylor on Ukraine's economic problems

From Primer on Ukraine's Economic Troubles "Ukraine's economy has some strengths. Inflation is under control. Unemployment at about 8% is not  super-high. The accumulated public debt, at about 41% of GDP, is not especially high.  But Ukraine is also a highly open and not very diversified economy, and thus highly vulnerable to movements of a few key prices on world markets--steel exports, energy imports, its own exchange rate. Add undisciplined government spending that hands out copious energy and wage subsidies, together with an unstable financial sector and a lack of productivity growth, and Ukraine's economy is primed to melt down, as it did in 2008 and again in 2013. With the current turmoil, it's obviously not a convenient time for Ukraine to be building stronger economic and political institutions. But without such reforms and institutions, Ukraine's economy will remain highly unstable."
According to Wikipedia "The nation has many of the components of a major European economy - rich farmlands, a well-developed industrial base, highly trained labour, and a good education system. At present, however, the economy remains in poor condition."

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