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Ukraine slowdown 'destructive', president urges action

Ukrainian President Viktor Yushchenko called for concerted action to reverse a drop of up to 30% in the economy which has slashed exports, jobs and living standards in the ex-Soviet state.

In his state of the nation address to parliament, Yushchenko said the economy shrank 25%-30% in January-February and demanded changes to the 2009 budget as the chamber began debate on legislation needed to restore the flow of International Monetary Fund (IMF) credits.

The president, long at odds with Prime Minister Yulia Tymoshenko, urged politicians to cease the rows which have thwarted reform efforts as Ukraine gears up for next year's presidential election. He also proposed political change, including the creation of a second chamber of parliament. “We were ill-prepared to confront the crisis and its first blow was painful and difficult...,” Yushchenko told deputies in a 45-minute address.

“The consequence of this was a slowdown in GDP growth in 2008 to 2.1%...and a destructive fall of 25%-30% according to figures from January-February 2009.”

Growth in the first two months of 2008 was 5.8%.

Yushchenko said he was quoting the figures despite “determined efforts to conceal them.”

The State Statistics Committee has stopped publishing monthly GDP growth rates and now releases them only quarterly, three months after the event.

“Before the crisis, (annual) growth rates in the Ukrainian economy stood at 6.5%-7.0%. I believe, I am certain that this indicator will be restored,” the president told deputies.

“We have lost our foreign markets and 60% of Ukrainian exports. All our foreign currency earnings depended on these markets as did the jobs of nearly two million people in steel, chemicals and related sectors.”

Parliament on Tuesday passed two of several pieces of legislation intended to restore the flow of credits from a $16.4 billion IMF loan - including increases in excise taxes on tobacco, alcohol and diesel fuel.

Examination of other bills was put off, including measures to balance the finances of state energy firm Naftogaz and the state pension fund.

The IMF suspended credits in a disagreement over the implementation of reforms and the size of the budget deficit.

Yushchenko said the first steps to take were a cut in budget expenditure and measures to support the banking system.

“We must review the 2009 budget immediately and fundamentally,” he said. “We must reduce all unproductive expenditure and once and for all live within our means.”

He also demanded a review of the finances of Naftogaz, failing which it would fall victim to “dramatic” consequences.

The IMF initially insisted on a deficit-free budget, but now says it can accept a deficit if financing is ensured.

Attention in the ex-Soviet state has focused for more than a year on disputes on virtually all political issues pitting Yushchenko against Tymoshenko.

He said it was time to “halt political passions and impose a moratorium on conflicts and settling of accounts.”

The president said creating a second chamber of parliament would help take account of regional interests and called for a country-wide referendum to endorse the change. (Reuters)