COVID-19: Economic Trends and Investment Trends in Ukraine
COVID-19 has changed not only the life of every single individual around the world, but also the domestic and foreign policies of many countries. The pandemic and its consequences, lockdowns in almost all developed and developing countries, the transition to adaptive quarantine measures - all this has become a shock therapy, which we are gradually recovering from with varying degrees of success.
The negative impact of COVID-19 on the “health” of Ukraine’s economy is obvious, and is aggravated by corruption, inflation, political instability, high taxes, unnecessary bureaucracy, and ineffective governance. However, we should never forget that there is an opportunity in every crisis. The history of the world economy shows how true this statement is. And Ukraine, as a market, is no exception to that.
According to the latest quarterly investment report of the NBU, the economy of Ukraine in 2020 will contract 6%, however, growth is expected by 4% in 2021.
Ukraine is a large and diverse market. And from this point of view, it looks attractive to investors.
Ukraine is # 64 in the Doing Business ranking of the International Bank for Reconstruction and with a score of 70.2, which is 1.1 points better than last year's assessment of Ukraine's attractiveness (69.1 points).
Ranking on Doing Business Topics (1-190) Ukraine
While the service sector, transport services, and the tourism industry are leaders among the “losers” affected by the coronavirus crisis, the agricultural, IT, telecom/mobile communications and energy industries have blossomed, generating more profit than ever before. E.g., the indicators of the first quarter of 2020 in the telecommunications industry of Ukraine amounted to over UAH 17 billion, which is 11.2% higher than the indicators of the same period in 2019.
The Structure of Telecommunication Services Income (UAH million)
Ukraine’s IT sector keeps getting stronger every year. The scope of foreign investment keeps growing despite the current crisis. Market experts often say that Ukraine is becoming an “IT hub for foreign companies”.
In the first half of 2020, Ukrainian startups attracted more than $ 0.5 billion in investments. (https://nv.ua/)
According to the State Statistics Service, as of October 1, 2019, the largest investors in the Ukrainian economy were: Cyprus with $ 761 million, the Netherlands with $ 438 million, Russia with $ 220 million, Switzerland with $ 133 million, and Germany with $ 89.9 million (https: // delo.ua/)
Most often, investors choose several sectors at once to avoid the risks associated with decline of a certain industry.
And, of course, three more positive economic factors are important: people, resources, and location.
COVID-19 has changed this factor for the better for those who want to seize the opportunity and know how to use it. Here, we are talking not only about the quantity of labor, but about the quality, which has increased due to the return of migrants who are providing services in accordance with European quality standards.
#2. Natural Resources
According to experts, the cost of such reserves exceeds $ 1 trillion. Meanwhile, experts insist that the investment value of this sector should pertain not to the export of natural resources as such, but to processing them and exporting the end products to international markets.
#3. The Geographic Location of Ukraine.
Last but not least, the very location of our country turns Ukraine into the new Silk Road and the Baltic-Black Sea transport corridor, thanks to which Ukraine has every opportunity to profit from transit rent.
All these factors combined can and should develop Ukraine as one of the best markets to invest in.