Business Update: COVID-19 pushes more Ukrainian families below poverty line

The number of Ukrainian households at or below the official poverty line will grow to 45% in 2020, the Social Policy Ministry has stated, as reported by UNIAN. Effects of the coronavirus pandemic in Ukraine will drastically affect the country’s society and its economy, pushing more families into poverty, the ministry and independent experts said.

The amount of families living in poverty or extreme poverty will increase by 6.5 percentage points compared to last year, according to studies by the Institute for Demography and Social Studies at the National Academy of Sciences of Ukraine. The monitoring of poverty indicators in 2019, 2018 and 2017 had shown a positive trend indicating a fall in poverty in Ukraine, experts said.

The ministry said that the COVID-19 pandemic may have set back Ukraine’s progress on poverty by three or four years. “Over the past three years, Ukraine was confidently moving out of crisis and there was a real chance it might have reached the 2008 level (prior to the economic crisis) in terms of poverty,” the Social Policy Ministry said in a statement. “Absolute poverty (when household income is below the poverty line) had decreased from 58.6% in 2016 to 43.2% in 2018.” Last year the number of households living at or below the official poverty line in Ukraine was at 38.5%, according to government figures.

The number of Ukrainians living in poverty may grow by over 9 million, including almost 2 million children, according to UNICEF’s worst-case scenario for poverty levels in the country. That scenario would see about 50% of the population living at or below the poverty line as a result of the COVID-19 pandemic. While the country has so far escaped an overwhelming number of COVID-19 cases and deaths, the disease’s impact on the economy is being felt.

S&P Global Ratings predicted on May 21 that Ukraine would see a 5.5% decline in its economy in 2020, but a return to 5% growth in 2021, and 3% growth in 2022. Other estimates have predicted the economy will shrink by 3-9% before it starts to bounce back next year.

The number of people sick with the COVID-19 disease has decreased in seven regions of Ukraine, but remains the same in three others, the National Security and Defense Council has stated. The number of people who recovered from the COVID-19 coronavirus disease in Ukraine has exceeded the number of those affected over the past day, and the number of patients has reduced in seven out of 24 regions of Ukraine, as well as in Kyiv, the Council said in a report. Numbers in three regions remained unchanged, the NSDC said.

Former head of the State Customs Service Maksym Nefyodov is appealing his termination in court, the press service of a Kyiv court said on Wednesday, May 20. The court stated: “Nefyodov asked Kyiv Regional Administrative Court to reinstate him as head of the State Customs Service. The lawsuit is filed with Kyiv District Administrative Court.” The Cabinet of Ministers of Ukraine dismissed Maksym Nefyodov from his position on April 24 amid accusations that Nefydov, a popular reformist figure, had not done enough to tackle corruption, crack down on tax evasion, and had not levied enough tax for the state.

Ukraine’s new Finance Minister Sergei Marchenko has justified the government’s firing of Nefyodov. In a May 21 interview with Novoye Vremya, he said:  “I do not see this as a problem. I would not concentrate on personalities, but look more broadly – at the efficiency of the tax and customs services… We were in a crisis, but the situation did not change. It was a radical measure to shake up the system and create manageability.” Marchenko pointed to a lack of tax revenue and the availability of tax avoidance schemes as key reasons for dismissing Nefyodov.

Razumkov signs law on banks necessary for further Ukrainian cooperation with the IMF. Verkhovna Rada Chairman Dmytro Razumkov has now sent bill No. 2571-d, which aims to improve banking regulation mechanisms, to President Volodymyr Zelensky for his signature. The new law and moves to unlock the Ukrainian farmland market are widely seen as necessary in order for Ukraine to unlock credit and secure new programs with the International Monetary Fund (IMF). Among other things, the banking law makes it impossible for insolvent banks that were nationalized to be returned to their former owners.

State-owned PrivatBank increased its assets by 11.4% through 2019, the bank said in a statement. The assets of PrivatBank (which faced bankruptcy and insolvency in 2016 when it needed to be nationalized by the state) amounted to 309.7 billion hryvnia, or about $11.5 billion, up 11.4% over 2018 (278.05 billion hryvnia). The bank said that through last year its consumer loans portfolio grew by 18.8% and investment securities decreased by 15.5%.

PrivatBank will transfer almost $1 billion to Ukraine’s state budget from its 2019 profits. The yearly dividend to its only shareholder, the Ukrainian government, secures PrivatBank’s status as one of the country’s biggest taxpayers. The bank is to transfer 75% of its net profit, or 24.4 billion hryvnia ($920 million), straight to the national budget.

The government has increased the financial support payable to farmers and beekeepers for 2020. Changes to the current subsidy program means that an extra 1 billion hryvnia, or about $37.6 million will be made available to food producers in Ukraine, Liga.net reported.

Minister of Economic Development, Trade and Agriculture Igor Petrashko reportedly said:  “The support will be aimed, in particular, at stabilizing livestock, the number of bee colonies and improving their genetic potential, stimulating an increase in livestock and beekeeping production, as well as creating new capacities for grain storage.”

The number of IT specialists registered as self-employed in Ukraine grew by 22% in 2019, up to 183,000 people from 151,000 in 2018, UNIAN has reported, citing the latest official data. The largest growth in the number of specialists was recorded in the capital city of Kyiv and Kyiv region – there, almost 11,000 new IT specialists registered as entrepreneurs. But according to national data, Volyn, Rivne, Ivano-Frankivsk, and Poltava regions showed the highest growth rate in the number of IT individual entrepreneurs, where the number of specialists grew by 25% through the year.