Igor Mazepa on the risks of the global economic crisis and its possible consequences for Ukraine

Igor Mazepa believes that the reasons for a new global economic crisis could become a trade war, oil prices and cooling economies of the European Union. Say exactly when there will come a new financial crisis and whether it will have a global reach, until nobody can.

 

At the moment really there are a number of prerequisites for the world economy the problems started. But to say precisely when there will come a new financial crisis and whether it will have a global reach, until nobody can.

 

The main causes of the crisis include the following:
▪ First, the slowing economy of China, which for the last decade has been the locomotive of global economic growth, causing turmoil in world markets. First and foremost, this applies to commodities that may affect the Ukraine, because we are still heavily dependent on raw material prices (particularly for iron ore and steel, and grain). Here you need to say and trade wars, the United States and China. If in the near future there will be progress in negotiations between the US and China – duties on imports of goods from China to the U.S. can grow significantly, which will lead to a further reduction in the productive capacity of China and a further slowdown of its economy.

▪ Second, the “cooling” of the EU economy, which is the main trading partner of Ukraine. In three key EU economies – Germany, France and Italy – slowing down economic growth. The numbers speak for themselves: the economy of Germany by the end of 2018 rose 1.5% – the lowest figure for the last 5 years. As for Italy: in October 2018, Moody’s downgraded the credit rating of the country in connection with the budget deficit in 2019 2.4% of GDP (which is three times the target of the EU).

Of the last two major crises (1998 and 2008) lessons were learned. Mechanisms that have been tried in past crises (currency issue, interest reduction and other) will be involved before the situation goes too far. And I hope that it will enable the world to avoid serious problems – says Igor Mazepa.

We should not discard the possibility of “black swans” and that we are still waiting for the new, unprecedented crisis. The financial sector is now much more sophisticated – all the processes take place much faster. Therefore, to respond to financial problems will need much faster. It is not excluded that the old regulatory methods may not be able to cope with new issues in case something goes wrong. Yes, geopolitical issues can also turn up the heat. For example, if the presidential post in the US will come to Mike Pence, currently Vice-President – it can become a serious challenge for the global financial system. Because Pensions if he will be able to influence the policies of the Federal reserve will change monetary policy “hawk” (in contrast to “dovish” influence of tramp). Pens – almost adept of the gold standard, and he has influential supporters with similar views who are deeply disgusted with the rampant monetary stimulus, observed in the last decade in the United States. This can lead to higher rates and lower liquidity, substantial capital outflows from emerging markets and the rise in the cost of new debt, the strengthening of the dollar. And, as a consequence of the global economic slowdown, sharp decline in commodity prices. And it can have a negative impact on Ukraine.

What awaits Ukraine in case of the global financial crisis

▪ If the financial crisis of insolvency (similar to the crisis of 1998 and 2008 – which is unlikely), it is likely that its impact on Ukraine will be insignificant. Yet we remain aloof from the mainstream financial processes. In 2008, Ukraine has suffered from the outflow of foreign capital. Now we have virtually nothing “to flow”, because since 2008 we don’t attract new investments – said Igor Mazepa.

▪ The biggest risk for Ukraine – the fall of prices for resources (especially for metallurgy and the agricultural sector). If resource prices will be significantly reduced in Ukraine may start a new round of economic crisis when our export sector will not earn a sufficient amount of currency. Accordingly, we may exacerbate problems with stability of the hryvnia. However, for the next six months we have a good margin of safety: last year’s record harvest in Ukraine gives hope that the currency will be stable.

 

In addition, Ukraine can count on the support of foreign creditors. The national Bank predicts that our Western financial partners can provide us with more than $ 9 billion of loans, accounting for nearly half of the amount we will need to pay in 2019-2021 and external government loans. Therefore, if the IMF will remain with Ukraine, I think that in 2019-2021 we can live without crises for our financial system – says Igor Mazepa.

What do the Ukrainians

If you have savings, then it is desirable of them to keep in hard currency (and in different currencies), part of deposits in the national currency or in securities the Ministry of Finance, while they bring a good return. What exactly don’t need to invest for capital preservation – so it is different cryptocurrencies.

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