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DOI: https://doi.org/10.34069/AI/2022.55.07.25
How to Cite:
Okhrimenko, O., Chynchyk, A., Dergach, A., Bannikova, K., & Nesterenko, O. (2022). Strategies for economic development: the
Ukrainian case. Amazonia Investiga, 11(55), 234-248. https://doi.org/10.34069/AI/2022.55.07.25
Strategies for economic development: the Ukrainian case
Estrategias de desarrollo económico: El caso de Ucrania
Received: May 3, 2022 Accepted: July 7, 2022
Written by:
Okhrimenko Oksana107
https://orcid.org/0000-0001-7361-3340
Chynchyk Anatolii108
https://orcid.org/0000-0003-4017-4753
Dergach Anna109
https://orcid.org/0000-0003-2713-0094
Bannikova Kateryna110
https://orcid.org/0000-0002-5696-1033
Nesterenko Olena111
https://orcid.org/0000-0003-0886-8173
Abstract
The article studies the peculiarities of economic
strategies of developed countries of the world
and carries out a comparative analysis of the
strategic goals of Ukraine and Poland. Based on
correlation and graphical analysis, it is proved
that the basis of economic growth of Poland,
which had actually the same starting conditions
as Ukraine after the collapse of the USSR, is the
economic ideology, which provides for the
development, stimulation, and support of the
processing industry. In particular, the study
showed that it is the deindustrialization of the
Ukrainian economy and the reduction of
processing industry products in the structure of
Ukrainian exports leads to a slowdown in the
growth rate of absolute GDP and GDP per capita,
in Poland, there are cardinally opposite trends.
The formation of economic strategies within the
framework of the ideology of stimulation of the
processing industry adapts macroeconomic
policy to meet such goals by increasing capital
expenditures, implementation of state-targeted
development programs, debt financing. Besides,
an important strategic principle of Ukraine's
economic strategies should be the principle of
107
Doctor of Economics, Professor International Economics Department National Technical University of Ukraine “Igor Sikorsky
Kyiv Polytechnic Institute”, Ukraine.
108
Candidate of economic sciences, assistant professor, Department of Construction Economics Kyiv National University of
Construction and Architecture Povitroflotsky, Ukraine.
109
PhD in Public Administration, Associate professor Department of Production and Investment management Faculty of Agricultural
Management National University of Life and Environmental Sciences of Ukraine, Ukraine.
110
PhD, Candidate Sociological sciences (22.00.04 - Special and sectoral sociology), Director of Talent Acquisition and Human
Resources V. N. Karazin Kharkiv National University, Kharkiv, Ukraine.
111
Doctor of Science (Economics), Associate Professor Department of economic theory, macro- and microeconomics Faculty of
Economics Taras Shevchenko National University of Kyiv, Ukraine.
Okhrimenko, O., Chynchyk, A., Dergach, A., Bannikova, K., Nesterenko, O. / Volume 11 - Issue 55: 234-248 / July, 2022
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increasing capital expenditures of the state
budget, at the expense of deficit and debt
financing of target programs of the economic
market.
Key words: economic strategy, economic
ideology, strategic principle, processing
industry, postwar economy, economic
development.
Introduction
At the beginning of 2022, Ukraine entered a new,
most large-scale crisis of civilizational, social,
and economic nature, which arose as a result of
unprovoked aggression on the part of the Russian
Federation. The full-scale war against Ukraine
became a challenge for the Ukrainian state,
which led to the need to review not only the
historical past, political miscalculations,
economic policy of the pre-war period, but in
general the economic and social structure of the
country and strategic priorities of economic
development.
After the end of the war, regardless of the
territorial configuration formed as a result of its
results, Ukraine, as an independent state in the
new geo-economic and geopolitical reality will
have to restore the infrastructure destroyed by
war and develop a new form of economy, without
a clear and balanced economic strategy at the
macro-, micro- and meso-levels will not allow to
quickly achieve the desired results. Moreover,
given the readiness of the European Union, the
United States of America, and other partner
countries to participate in the reconstruction of
postwar Ukraine, the economic strategy of the
Ukrainian state should become a roadmap for the
development of international cooperation and
integration of Ukraine into economic and
security alliances.
According to the Kyiv School of Economics, as
of May 25, 2022, the amount of direct damage to
Ukraine's economy from military action to
infrastructure and residential and non-residential
buildings exceeded $105.5 billion or more than
3.1 trillion UAH (Kyiv School of Economics,
2022), equivalent to 56.4% of GDP as of 2021.
In addition, given the destroyed vehicles, roads,
factories, retail outlets, and loss of businesses,
the total loss of Ukraine's economy from the war
is estimated at between $564-$600 billion (Kyiv
School of Economics, 2022) or 320% of GDP in
2021. This indicates that Ukraine suffered losses
during the three months of the war (which is
ongoing and, according to military analysts, will
continue for at least another three to five months)
that are three times higher than the GDP of 2021.
This situation indicates the need to form a
strategy of economic development of Ukraine at
the macro, meso, and micro levels, which will be
based on the results of the war and take into
account the relevant, so-called financial
assistance packages from partner countries.
Analyzing the course of negotiations of the
Government of Ukraine with partner-countries
and the European Union, we may conclude that
the mechanism of targeted external financing for
infrastructure and economic rehabilitation will be
discussed, which will contain specific
requirements for the necessary reforms, which
will form the basis for the economic development
strategies of the Ukrainian state.
The analysis of effective strategies of
macroeconomic development of countries of the
world is important for building strategies of the
economic development of Ukraine in conditions
of war and post-war period. Taking into account
the development of cooperation between Ukraine
and Poland in the conditions of war and the
announcement of a number of joint initiatives,
including joint customs control, in our opinion,
the Polish experience of forming economic
strategies should be used in Ukraine, including,
taking into account approximately the same
starting conditions for the development of
countries after the collapse of the Soviet Union.
Thus, the purpose of the article is to study the
peculiarities of economic strategies of developed
countries of the world and analysis of Ukrainian
experience in implementing economic strategies
and on this basis formulation of key strategic
principles of economic strategies of Ukraine in
the postwar period.
Theoretical Framework or Literature Review
The study of the theoretical postulates of
strategic planning in business became
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widespread back in the 1980s in the system of
scientific schools of management, among which
it should be noted the school of American
scientist Michael Porter, who studied the features
of strategic positioning of the company in the
market, competitive analysis, scenario planning,
etc. After the publications of Michael Porter on
business strategies and economic strategies at the
microeconomic level in general, the science in
this context has developed significantly.
Today, one of the publications on economic
strategies at the microeconomic level that
deserves attention is the book “About strategy,”
which brings together the top 10 articles
published in the world-famous Harvard Business
Review (Porter et al., 2011). An analysis of the
collected publications in the aforementioned
book allows us to highlight the fundamental
tenets of economic strategies at the micro level.
One of these postulates should be considered one
that understands economic strategy not only as a
long-term plan for a company's economic
development but as a unique combination of
values and activities for companies to achieve
certain strategic goals. The emphasis on the
unique combination of values shows that there
cannot be the same economic strategies because
each of them should take into account the
peculiarities of this or that company, which are
unique in nature, and therefore blindly copying
the strategies of other companies or
organizations is doomed to failure. Another
postulate of economic strategy at the micro level
is the approach to the consideration of the
company as a whole, whose activities are based
on the coherence of the functions and activities
of the structural units because it is coherence that
allows to avoid differences in the planning of
strategic objectives and the implementation of
measures to achieve them. Successful strategy
development and implementation requires strong
leaders who are able to make a choice between
concepts, approaches to strategy building, and
strategic goals. An effective economic strategy
must fuse on the imperative of an organization's
core ideology, which defines the legitimate
essence of a company that transcends product or
market life cycles, its technological advances, its
leadership, and its individual leaders. A core
ideology is based on key strategic principles and
the key purpose of a company, which are deeper
motives for its existence than making money.
Strategic principles are designed to help
companies or organizations stay focused on
strategy while encouraging flexibility among
employees that opens the door to innovation and
rapid response to opportunities. The essence of
the strategic principle is that every member of the
organization, from top management to
employees in operational units, can consciously
move toward the same strategic goal without
being constrained in their movement. The key
ideology should only matter to and inspire people
within the organization; it does not have to be
appealing to outsiders.
An important postulate for building a micro-level
economic strategy is the envisioned future, which
should contain an ambitious goal for 10-30 years,
as well as a vivid description of what the
company will be in terms of achieving this goal.
That is, the company must formulate a vision of
its development in the long term. At the same
time, thanks to the strategic principles and key
ideology all employees of the company should be
aware of the vision and purpose of the company,
following it not only in working time but also in
everyday life. All this allows innovation in the
development of the firm, contributing to the
achievement of key business goals (Kibik et al.,
2022).
Not less important postulates of a micro-level
strategy is the establishment and awareness of
personal responsibility for the actions and
decisions aimed at implementing the strategy.
Control over the implementation of the strategy
should be carried out through the analysis of the
balanced scorecard, the implementation or non-
implementation of which is a reason to determine
the level of personal responsibility.
A collection of Harvard Business Review's top
ten articles “About Strategy” allows you to
understand the basics of strategic planning not
only at the microeconomic level but also to
integrate the outlined postulates at the meso and
macro levels.
Macroeconomic level economic strategies are
more complex economic development strategies
because they involve a broad compromise
between different political and socio-economic
groups of the country, are based on consideration
of the historical past and existing challenges to
the economic system, and the effectiveness of
such strategies depends on the ability of the
authorities to invent a unique formula. of
economic development of their state. Each
country in the world has its own strategy of
economic development or several strategies
depending on the specific period, which gives
reason to study this or that experience and
implement its best examples in the Ukrainian
case of strategic planning for economic growth.
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Analyzing the scientific literature on the
problems of strategic planning for economic
development, from our point of view we should
pay attention to the developed countries of Asia,
primarily Japan and China, which in a relatively
short period of time became the leaders of
economic growth in the world economy.
Thus, the study by Liu (2021) on the economic
development strategies of Japan deserves
attention, which clearly emphasizes the historical
development of this country, which significantly
influenced the formation of strategic plans. In
particular, the author notes that after the defeat in
World War II Japan used the strategy of
developing international trade based on the
export of raw materials (given the fact that Japan
is an island country with many mineral deposits)
and the production of military goods for the
needs of the American army. In the mid-1970s,
however, Japan switched to an economic strategy
based on scientific and technological progress
and high-tech production. This strategy became
crucial for Japan's economic development, and
even during the crisis in the 1990s and the
transition to a quantitative easing strategy, i.e.,
the use of financial levers to stimulate economic
development, high-tech production remained the
basis for the development of the Japanese
economy. Moreover, the so-called abenomics
strategy was aimed (through credit easing and an
increase in Japan's public debt) at the
development of the real economy. Thus,
financing the development of the real sector of
the economy based on scientific and
technological progress has become the basis of
Japan's economic strategy.
A somewhat similar economic strategy after the
global financial and economic crisis of 2008-
2009 was the economic strategy of the United
States based on debt financing of economic
growth (Driessen, 2019). The essence of this
strategy is that the growth rate of U.S. gross
domestic income is higher than the growth rate of
public debt, such trends are achieved because
public debt is used to finance specific targeted
government economic development programs,
which are primarily aimed at the development of
the real sector. economy and production with a
high share of added value. At the same time, one
of the most active participants of the U.S.
economic strategy is the Federal Reserve System,
which uses unconventional monetary policy
instruments (Trifonova & Kolev, 2021;
Feldkircher et al., 2020) to create cheap financial
resources in the form of targeted loans and
securities buyback mechanisms to finance
economic development.
Along with Japan and the United States, a study
of the economic strategies of China, as one of the
leaders of the world economy, should be
considered. Special attention should be paid to
the comprehensive study “China's Economic
Growth Path” (Yaomin, 2020), in which the
author describes in detail the main steps of
China's economic reforms and the peculiarities of
the construction of economic strategies. In our
opinion, one of the main features of the formation
of China's economic strategy is to take the third
session of the CPC Central Committee in each
five-year period to discuss it. Thus, the results of
the session are fixed by the decision of the
Central Committee of the CPC, allowing to
supervise its implementation in practice. In
addition, China used the original approach to the
formation of economic strategy, which says that
it is not necessary to copy the models and
experiences of other countries, it is necessary to
explore their own way, based on the reality of
China, and build socialism with Chinese
characteristics. Chinese characteristics are as
follows: active implementation of scientific and
technological progress and innovation in the
Chinese economy, active state support for the
development of the real economy through direct
budget financing channels and lending by
specialized development banks, and active
expansion of China's participation in global trade
through the creation of bilateral free trade zones
and the signing of interstate treaties (Song,
2018). A somewhat similar experience of
economic strategy formation is demonstrated by
Poland, where as well as in China, the economic
strategy of the country is approved at the
governmental level (Gadomski, 2017), the latter
of which is built on the principle of analyzing the
historical development of the country and taking
into account its miscalculations and national
peculiarities (Kołodko, 2019). Having
abandoned the concept of the Washington
Consensus, having reconsidered the radicality
and mistakes of shock therapy, Poland
emphasized the development of the processing
industry and support for innovation, which
became the main strategic principles of the
country for the next ten years. An important
contribution to the development of theoretical
concepts of economic strategy formation has
been made by works Zolkover et al. (2021),
Kibik et al. (2022) and Buriak (2019) where
considerable attention is paid to the introduction
of innovation in economic development, use of
human capital and human potential to stimulate
economic development, as well as elements of
social and economic consolidation as the basis
for the implementation of mesolevel economic
strategies.
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Analyzing the scientific works of the
aforementioned authors, it should also be noted
that economic strategy at the micro and macro
levels is based not only on economic indicators,
but on the institutional basis of its development,
implementation, and monitoring the achievement
of objectives. Formal and informal institutions
create conditions for employees and citizens to
perceive and penetrate the vision of the
development of the company, society, and the
state respectively, which contributes to achieving
a high level of consistency of actions, functions,
and decisions at all stages of implementation of
economic strategies.
Methodology
The following methods were used in the study:
− analysis and synthesis - in the study of
scientific literature and the identification of
features of economic strategies of developed
countries of the world and Ukraine;
− economic-statistical analysis and
comparison - in the study of the dynamics of
some indicators of economic development
of Ukraine;
− economic-mathematical method - in the
study of correlation relationships between
indicators of economic development and
indicators of macroeconomic policy and
Poland in order to identify the factors of
rapid economic growth of Poland;
− generalization - for the formation of
scientific-theoretical and practical
recommendations on the construction of
economic strategies in Ukraine in the
postwar period, taking into account the
effective experience of developed countries.
Results and Discussion
The formation of economic strategies at the
micro, meso, and macro levels in Ukraine today
is indeed an urgent task, because the large-scale
destruction of infrastructure, major enterprises
that provided a high share of GDP production,
the growth of unemployment, and forced
emigration, requires a radical revision of
approaches not only to strategic planning but also
in general to economic policy. In this context, in
Ukraine, as in China and Poland, it is important
to take into account the historical aspects of
economic development since independence.
Thus, the initial stage of national economic
development after Ukraine's independence is
characterized by an inefficient and weak
institutional environment, which did not
facilitate the rapid and balanced implementation
of economic reforms. The existence of well-
established traditions of the command-
administrative type of economy, the lack of a
clear understanding of market economy
mechanisms in the system of power institutions
led, on the one hand, to a delay in the adoption of
necessary legislative acts and strategic
documents (formal institutions) and, on the other
hand, to a slow recovery of national economic
traditions, such as cooperative movement,
farming (informal institutions), etc.
In addition, the rapid rupture of intereconomic
ties with the countries of the former Soviet Union
and Ukraine's exit from the ruble zone led to a
large-scale economic crisis, which was overcome
by the guidelines of Western economic advisors
and, since 1994, by the International Monetary
Fund. Western economic advisors and IMF
experts successfully persuaded the Ukrainian
authorities to integrate the quasi-liberal
“Washington Consensus” concept, which
implied a rapid introduction of free market
mechanisms, in particular full price
liberalization. However, the absence of proper
legislative support of national economic
development, mechanisms of national producer
protection, and support of production with a high
share of added value during price liberalization
led to the gradual destruction of the scientific,
technical, and production potential of the
country, which resulted in deindustrialization
and actual transformation of Ukraine into a raw
materials appendage of developed countries of
the world.
In our opinion, in the 1990s, the liberalization of
prices in Ukraine, when the economy had not yet
been restructured on an independent path of
development, was a fatal mistake of the
Ukrainian authorities, because imports of goods
from Western countries (companies that had the
ability to attract cheap loans, large amounts of
state support and considerable experience in
market competition) obviously had a higher
competitiveness than products of Ukrainian
enterprises, which have just begun to adapt to the
open market.
The misunderstanding and ill-considered
planting of liberalism concepts, propaganda of
open market economy experience, and free self-
regulating market both in the activities of
authorities and in the training of economists
through an emphasis on the advantages of liberal
schools of economic theory led to the creation of
a well-established idea that the highest public
benefits could be achieved by abandoning state
regulation of the economy. However, in copying
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the foreign experience of economic regulation,
domestic reformers did not take into account the
aspect that the legal environment of Western
countries was several orders of magnitude more
efficient than that of the young post-Soviet state.
Yes, it is true that in developed countries there
are fewer permits to open a business, fewer types
of taxes, and other barriers to market activities,
but the responsibility for corruption, violation of
antimonopoly laws, financial fraud, and non-
payment of taxes is much higher, and the judicial
system is much more efficient, and these are all
the true conditions for a free market. The
inability of the legal system to enforce the
economic law led to the formation of
monopolies, uncontrolled redistribution of rents,
excessive government support of the primary
sector of the national economy, which ultimately
affected the real objectives of the economic
strategy of Ukraine - to increase exports of raw
materials (including products of primary
processing of agrarian industry) and fulfill the
conditions of the International Monetary Fund.
Similar problems of building a market economy
in the 1990s are recognized by modern
economists in Poland, they are critical not only
of attempts to implement the concept of the
“Washington Consensus”, but also to the policy
of shock therapy, the period of which is
repeatedly called the lost period of development
of the Polish economy (Kołodko, 2019).
As for economic strategies of macroeconomic
level in Ukraine as state program documents, we
should pay attention to three recent strategies:
Strategy of economic and social development of
Ukraine for 2004-2015 “Through European
integration” (Verkhovna Rada of Ukraine, 2004);
Sustainable development strategy “Ukraine –
2020” (Decree No. 5/2015, 2015); National
strategy for the development of civil society in
Ukraine for 2016-2020 (Сabinet of Ministers of
Ukraine, 2016). It should be noted that none of
the above-mentioned strategies were
implemented, and the priority goals were not
achieved.
Thus, each strategy assumed improvement of the
investment climate, the attraction of investments,
increase in GDP per capita, development of
entrepreneurship, advanced economic
development, etc. In practice, a paradoxical
situation arose, clearly demonstrating the
ineffectiveness of economic strategies: the volume
of remittances of Ukrainian guest workers
significantly exceeded the volume of foreign
direct investment, despite the fact that each of the
above-mentioned strategies contained goals to
increase investment and improve the investment
climate (Fig. 1).
Fig. 1. Dynamics of Foreign Direct Investments and Remittances in Ukraine in 2004-2020
Source: External sector statistics (National Bank of Ukraine, 2022)
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In addition, it should be noted that in every
development strategy of Ukraine, including
economic strategies, there are goals for the
growth of the absolute volume of GDP and GDP
per capita, but in terms of GDP per capita,
Ukraine ranks last in Europe.
In our opinion, such problems in the achievement
of strategic goals of economic strategies of
Ukraine are connected with absence of economic
ideology, key strategic principles, and qualitative
targets of economic development.
In this context, it is advisable to compare the
targets of economic development presented in
the Ukrainian and Polish economic strategies
(Table 1).
Analyzing the target macroeconomic indicators
given in the economic strategies of Ukraine and
Poland, we should note a more qualitative
approach of Polish economists to the formation
of such indicators, as the Polish strategies contain
those indicators which determine the dynamics
of such general macroeconomic indicators as the
dynamics of GDP and the dynamics of GDP per
capita.
Table 1.
List of strategic goals and economic strategies of Ukraine and Poland
Ukraine (Sustainable Development Strategy “Ukraine 2020”.
Vectors of economic development 2030)
Poland (Strategy for Responsible Development 2017;
National Development Strategy 2012)
In the World Bank's “Doing Business” ranking Ukraine will
take a place among the first 30 positions;
Adjusted real gross household income per capita at
PPP (purchasing power parity) relative to the EU
average - an improvement from 68.5% in 2014 to
76.0-80.0% in 2020 and 100% in 2030.
Ukraine's credit rating - the rating on liabilities in the
foreign currency according to the scale of the rating agency
Standard and poors - will not be lower than the investment
category “BBB”;
Reduce the risk of poverty from 20% in 2015 to
17% in 2020.
According to the global competitiveness index, which is
calculated by the World Economic Forum (WEF), Ukraine
will be among the 40 best states of the world
GDP per capita at PPP relative to the EU average
of 75-78% in 2020, and 95% in 2030.
GDP (in purchasing power parity) per person, the World
Bank calculates, would rise to $16,000
Ginny coefficient - down from 30.6 in 2015 to 30
in 2020 and 27 in 2030;
The maximum ratio of state budget deficit to GDP,
according to IMF calculations, will not exceed 3%;
The share of industrial processing in gross value
added - an increase from 19.7% in 2015 to 20% in
2020 and 21% in 2030
The maximum ratio of total public debt and publicly
guaranteed debt to GDP, according to IMF calculations, will
not exceed 60 percent (according to the Maastricht
convergence criteria);
The number of apartments per 1,000 inhabitants -
increasing from 367 in 2015 to 389 in 2020 and
435 in 2030.
The energy intensity of GDP will be 0.2 tons of oil
equivalent per $1,000 of gross domestic product, according
to the International Energy Agency;
The state budget deficit maintains a deficit below
3% of GDP.
Achieve a reduction in the unemployment rate to 5%
The national debt will remain below 60% in 2020
and 2030
Achieve a net inflow of foreign direct investment of at least
5% of GDP per year
State tax revenues - will increase from 19.8% in
2015 to more than 20% in 2020 and 2030.
Achieve labor productivity of at least $20,000 per
employee. Achieve a labor productivity rate of at least
$20,000 per employee and 30% of the EU rate for 2019
Investment rate from 20.1% of GDP in 2015 to
22.0-25%. in 2020 and 25% in 2030
Household savings rate - increase from 1.7% of
GDP in 2014 to 2.2% in 2020 and over 5% in 2030
Achieve a gross fixed capital formation ratio of 25% of
GDP
Share of renewable energy in gross final energy
consumption - from 11.45 percent in 2014 to 15
percent in 2020
The share of government spending aimed at
development as a percentage of GDP - an increase
from 16.4% in 2010 to 17.6% in 2020
Source: Sustainable Development Strategy “Ukraine – 2020”, (Decree No. 5/201, 2015); Vectors of
economic development 2030, (Сabinet of Ministers of Ukraine, 2020); Gadomski, (2017)
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Such indicators in Polish strategies are: the share
of industrial processing in gross value added and
the share of public spending aimed at the
development in GDP. Development of a
processing industry or industry with a high share
of added value is a key strategic principle not
only in Poland, but almost all developed
countries of the world because the processing
industry helps to create jobs (and therefore
contributes to reducing unemployment), attract
highly qualified personnel (increasing the cost of
labor, average income, and GDP per capita
indicator), and most importantly - protects the
economy from the influence of world commodity
cycles. The emphasis on the development of the
processing industry in Poland vividly reflects the
gap in the development of the Ukrainian and
Polish economies (Fig. 2).
Fig. 2. Dynamics of GDP per capita and the share of processing industry in Polish and Ukrainian exports
in 1990-2020
Source: Bank danych Makroeconomicznych, 2022; State Statistics Service of Ukraine, 2022.
The data in Figure 2 show that the decrease in the
share of the processing industry in Poland's and
Ukraine's exports affects the dynamics of GDP
per capita. The decrease in the share of the
processing industry in Ukraine's exports not only
does not contribute to GDP per capita growth but
indicates Ukraine's transformation into a raw
materials appendage of the developed world.
Moreover, under conditions of war with the
Russian Federation, it is the excessive
dependence on the export of agricultural raw
materials through ports on the Black Sea that
Ukraine has suffered significant export losses,
especially affecting the volume of foreign
exchange earnings amid panic on the foreign
exchange market.
Choice of such strategic principles of economic
development of Poland as the development of the
processing industry and increase of state
expenditures for the development of the country
mobilizes macroeconomic policy and
consolidates actions and decisions of authorities
on the implementation of economic strategies.
This can be confirmed by the results of the
correlation analysis of the main indicators of the
development of the Polish economy. Let us
reflect our calculations with the help of a
correlation matrix (Table 2).
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Table 2.
Correlation matrix of macroeconomic indicators of Poland's development in 2004-2020
GDP, $ billion U.S.
GDP per capita,
U.S. dollars
State budget deficit,
billion U.S. dollars
Capital
expenditures, billion
U.S. dollars
Capital expenditures
+ expenditures of
EU funds, $ billion
Current
expenditures,
billions of U.S.
dollars
Public debt, billions
of U.S. dollars
Foreign direct
investment
Coefficient of
economic
complexity
Index of economic
freedom
Freedom of
Investment
GDP, $ billion
U.S.
1
GDP per capita,
U.S. dollars
0,9999
1
State budget
deficit, billion
U.S. dollars
-
0,0137
-
0,0159
1
Capital
expenditures,
billion U.S.
dollars
0,7435
0,7472
0,0625
1
Capital
expenditures +
expenditures of
EU funds, $
billion
0,6283
0,6253
0,0109
0,7816
1
Current
expenditures,
billions of U.S.
dollars
0,9259
0,9237
0,0922
0,7987
0,8439
1
Public debt,
billions of U.S.
dollars
0,9513
0,9500
0,2357
0,6939
0,5658
0,8962
1
Foreign direct
investment
0,3231
0,3330
-
0,1111
0,3660
0,1487
0,2329
0,2651
1
Coefficient of
economic
complexity
-
0,5371
-
0,5358
0,0080
-
0,7057
-
0,7458
-
0,6450
-
0,5026
-
0,3344
1
GDP, $ billion.
U.S.
0,7370
0,7411
0,1338
0,4824
0,0915
0,4922
0,7568
0,3141
-
0,1262
1
GDP per capita,
U.S. dollars
0,8392
0,8436
0,0559
0,5905
0,2810
0,6460
0,8174
0,3367
0,2608
0,9480
1
Source: The Word Bank, 2022; Bank danych Makroeconomicznych, 2022; Index of economic freedom
(The Heritage Foundation, 2022); Country & Product Complexity Rankins (Atlas of economic complexity,
2020)
The data in Table 2 testify to a high level of
correlation between the indicators of fiscal policy
and such macroeconomic indicators as dynamics
of GDP and GDP per capita. Thus, the relation of
capital expenditures from the state budget of
Poland, as well as capital expenditures including
expenditures from the EU Funds with the
dynamics of GDP (r=0,7435) and the dynamics
of GDP per capita (r=0,7472) is comparatively
significant, and this indicates the effective
direction of public expenditures to achieve the
development goals, which corresponds to the
targets declared in the economic strategies.
The dynamics of current spending actually has a
direct relationship with the dynamics of GDP
(r=0.9259), which is quite natural, because the
financing of consumer purposes also has a
positive effect on the dynamics of GDP, but it
should be noted that the effect of consumer
spending is greater when the country has a large
domestic market and developed industry, whose
goods are the main object of purchase of public
and private sector organizations and their
employees. The main aspect in this context is the
level of localization of public spending,
characterized by the share of national production
in public procurement.
Directing capital expenditures to development, in
particular to the development of infrastructure,
public procurement of goods from the national
manufacturer, financing (subsidies, subsidies) of
enterprises producing products with a high share
of added value, allows to increase the coefficient
of economic complexity, reflecting the level of
diversification of the country's exports and its
level of technological complexity The lower the
value of this indicator, the higher the economic
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complexity of the country and, therefore, the
impact on economic growth (r=-0,5371)
Public debt plays an important role in the
economic development of Poland because with
the help of debt financing the Polish government
implements projects to develop economic
infrastructure, which is the basis of economic
growth.
Direct foreign investments, if we evaluate their
dynamics, have an insignificant influence on
GDP growth (r=0.3231), which is associated
with frequent changes in the economic and
political conjuncture in the European Union,
which negatively affects the behavior of
investors. However, in order to stimulate the
inflow of foreign investments and to create
conditions for the realization of domestic
investment potential, the Polish government is
actively working to increase economic freedom
and freedom of investment. The data in Table 2
confirm the fact that the increase in the index of
economic freedom (r=0.7370) and the index of
investment freedom (r=0.8392) contributes to the
growth of GDP and GDP per capita.
In contrast to Poland, most of the indicators of
macroeconomic policy in Ukraine have a lower
level of correlation with GDP and GDP per
capita, which indicates a lower level of
effectiveness of the implementation of the
economic strategy (Table 3).
Table 3.
Correlation matrix of macroeconomic indicators of Poland's development in 2004-2020
GDP, $ billion.
U.S.
GDP per capita,
U.S. dollars
State budget
deficit, billion
dollars. U.S.
Capital expenses
Ongoing
expenses
Public debt,
billion U.S.
dollars.
Foreign direct
investment
Coefficient of
economic
complexity
Index of
economic
freedom
Freedom of
Investment
GDP, $ billion.
U.S.
1
GDP per
capita, U.S.
dollars
0,9854
1
State budget
deficit, billion
dollars. U.S.
0,5358
0,5482
1
Capital
expenses
0,5742
0,5233
-0,0610
1
Ongoing
expenses
0,9499
0,9741
0,6673
0,3648
1
Public debt,
billion U.S.
dollars.
0,3908
0,5247
0,4706
-0,1900
0,6220
1
Foreign direct
investment
0,4287
0,3169
-0,1860
0,6264
0,2113
-0,4300
1
Coefficient of
economic
complexity
0,4073
0,5120
0,2940
-0,0908
0,5845
0,8401
-0,1357
1
Index of
economic
freedom
-0,2391
-0,2056
-0,3646
0,3333
-0,3008
-0,2890
-0,0386
-0,3783
1
Freedom of
Investment
-0,0129
0,0149
-0,3258
0,4907
-0,0995
-0,1735
0,1677
-0,1882
0,8526
1
Source: The Price of the State (2022); World Development Indicators (The Word Bank, 2022); International
economic activity and balance of payments (State Statistics Service of Ukraine, 2022); Index of economic
freedom (The Heritage Foundation, 2022); Country & Product Complexity Rankings (Atlas of economic
complexity, 2020).
As the data in Table 3 show, in contrast to
Poland, capital expenditures of the state budget
of Ukraine have a much lower level of
correlation with the dynamics of GDP
(r=0.5742), which is associated with more
frequent economic crises and the war with the
Russian Federation. Due to increased spending
on anti-crisis policy and war financing, Ukraine
does not have enough money to finance capital
expenditures. For this reason, the highest
relationship between the state budget deficit and
the dynamics of GDP, which indicates the use of
elements of deficit financing of economic growth
(r=0.5358), but this growth is mainly based on
the financing of current spending (r=0.9499).
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In our opinion, the absence of clear strategic
goals for the development of the processing
industry and the direction of public expenditures
to finance development goals is one of the main
reasons for the ineffectiveness of the economic
strategies of Ukraine at the macro level.
Moreover, the absence of such goals directs
public funding (subsidies, applications) to the
development of raw material and the agrarian
sector of the economy, which is also of raw
material nature. In turn, the growing share of raw
materials in the structure of Ukrainian exports
leads to increased dependence of the Ukrainian
economy on raw material cycles, and in
accordance with the constant pressure on the
currency and financial stability.
The reduction of economic complexity, its de-
industrialization, and the reduction of the share
of innovative products in the volume of industrial
production leads to a decrease in the growth rate
of GDP and GDP per capita, as the coefficient of
economic complexity has an inverse relationship
with the dynamics of GDP. It should be noted
that the higher the value of this coefficient, the
lower the level of economic complexity
(r=0.4073).
Such declared goals of economic strategies in
Ukraine as increasing the inflow of direct foreign
investments are also not fulfilled, as in Ukraine
there remains a rather large system of barriers
and risks for foreign investors, which leads to the
excess of migration capital over investment
capital (Fig. 1). For these reasons, there is
practically no correlation between the indicators
of economic freedom (r=-0.2391), investment
freedom (r=-0.0129) and the dynamics of GDP
and GDP per capita.
Based on the conducted comparative analysis of
the connection of macroeconomic indicators of
Poland and Ukraine with the indicators of their
economic development, as well as taking into
account the list and content of strategic
objectives and the effectiveness of their
achievement, we notice the necessity of revision
of the economic strategy of Ukraine, especially
in conditions of post-war restoration of the state.
Thus, the main aspect of building the economic
strategy of Ukraine should be a change of
economic ideology on financing and
development of the raw materials sector of the
economy for the development of the processing
industry with a high share of added value and
innovation, as well as the direction of state
funding for the development and restoration of
the destroyed infrastructure.
Given this economic ideology, it is advisable to
formulate appropriate strategic goals, conditions
of strategy implementation, and mechanisms of
financing strategic measures (Fig. 2).
Given the significant destruction of Ukraine's
economic infrastructure and the cessation of
activities of many enterprises that played an
important role in creating GDP, the main goals of
Ukraine's new economic strategy should be to
restore post-war GDP volumes, restore
infrastructure, and increase foreign direct
investment. However, it should be noted that
without the development of the real sector of the
economy and support for national processing
enterprises it is impossible to achieve rapid GDP
growth because the creation of new and
modernization of existing processing enterprises
will lead to the creation of new jobs, an increase
in high-tech exports, import substitution, and
expansion of the domestic market.
Given the post-war state of the economy,
Ukraine will have every right to postpone the
implementation of the World Trade Organization
requirements and introduce certain protectionist
measures, chief among which should be the
measure to increase the share of domestically
produced goods in public procurement to 50% by
2025. Such a measure would be a good incentive
for domestic producers, and therefore a goal of
the new economic strategy.
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Fig. 2. The structural and logical scheme of Ukraine's economic strategy
Source: The author's own development
To really achieve the goals outlined in the
strategy, it is important to create the conditions
for the implementation of the strategy. In our
opinion, one of the most important conditions for
the implementation of the economic strategy is a
judicial reform and the full launch of the
Economic Security Bureau, which will ensure
compliance with tax, customs, and antimonopoly
legislation, reduce corruption in customs and
other fiscal bodies. Such measures, in turn, will
increase revenues to the state budget of Ukraine
and will create conditions for increasing funding
of state-targeted programs for economic
development.
Raising the index of economic freedom and the
index of Doing business is a necessary condition
for increasing foreign investment because the
components of these indices reflect the
investment and business climate in the state and
the protection of investor rights and property
rights.
An equally important condition for the
implementation of Ukraine's economic strategy
is the legislative approval of the strategy itself
and the personal and departmental responsibility
for its implementation. This will avoid the
declarative state program documents and
increase the effectiveness of the macroeconomic
policy of Ukraine as a whole.
The mentioned conditions for implementing
Ukraine's economic strategy at the macro level
are also necessary for the mesolevel, which
includes oblasts and territorial communities
because creating a positive investment and
business climate and an effective legal
framework will not only attract investors to the
territorial communities but also increase the
revenues to local budgets.
As for the mechanisms of financing measures to
implement Ukraine's economic strategy, the
mechanisms of fiscal and monetary policy should
be used in the first place. Thus, on the fiscal
plane, state budget expenditures for economic
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development should be based exclusively on the
program-targeted method of financing, i.e., it is
necessary to develop state-targeted programs for
the development of priority economic sectors
(for example, processing industry, processing
agriculture) and infrastructure (“Big building”
and so on). To finance such programs, a
Keynesian approach can be used, involving an
increase in the state budget deficit. At the same
time, one of the options might be to raise public
debt exclusively to finance state target programs.
Receiving assistance for the reconstruction of
Ukraine's economy and infrastructure from
foreign partners is also a significant funding
mechanism, but in this context, it is important to
ensure maximum transparency of the use of such
funds and the patronage of foreign governments,
organizations, enterprises over programs for the
reconstruction of certain objects is necessary.
The participation of the National Bank of
Ukraine in the process of implementing the post-
war development strategy should be reduced not
only to the direct redemption of government
bonds as an instrument of emission financing of
the state budget but also to an increase in the
volume of productive emission. This emission
should provide an increase in the volume of
targeted refinancing loans to state banks under
loan programs at concessional interest rates,
directed to the enterprises of the real economy to
finance their modernization, expansion of
production capacity, and re-location.
In the context of the indicated objectives,
conditions and financial mechanisms of
Ukraine's macroeconomic strategy, economic
strategies of meso- and micro-level should be
developed. Thus, at the meso level, which
includes the level of regions and united territorial
communities, post-war economic strategies
should be based on attracting international
financial assistance, financial resources of
regional development fund, and self-financing
mechanisms.
The main goals of economic strategies at the
mesolevel in Ukraine should be the restoration of
infrastructure (or its improvement in those
territories where there was no combat
operations), increasing the living standards of the
population, increasing the volume of
investments, increasing the number of industrial
enterprises, developing tourism, etc.
As for the mechanisms of financing measures to
implement the economic strategy at the
mesolevel, the most attention should be paid to
the mechanisms of self-financing, which can be
divided into two groups: 1) targeted programs
and local budget benefits; 2) crowdfunding
mechanisms.
Thus, we note that local budgets have different
possibilities to finance local development
projects because the financial capacity of
communities is different; therefore, at the
mesolevel, a special preferential tax regime for
businesses can be implemented, which will
provide for exemption from land tax in case of
business registration in the united territorial
community.
Given that both in 2014 at the beginning of the
war with the Russian Federation and in 2022
during the full-scale invasion of Ukraine the
volunteer movement was active, there is every
reason to believe that organizing crowdfunding
for community development projects is a
promising idea. Crowdfunding as co-funding of
development projects implies the possibility of
involving not only residents of united territorial
communities, but also residents of the entire
country and the diaspora. At the same time, using
crowdfunding platforms, such as the
Community, it is possible to ensure not only
advertising of the project, but also transparency
of the use of funds.
As for the economic strategies of the
microeconomic level in Ukraine, today they are
actually aimed at the preservation of business and
its relocation from the sites of hostilities and
occupation. However, sooner or later the war will
end, and already now firms should form goals to
attract financial resources to modernize and
expand business through participation in
international grant programs, national financing
projects, and concessional lending programs.
At the same time, Ukrainian firms should take
advantage of the opportunities that will open up
after the war is over, namely the projected
increase in the flow of tourists to places of
combat operations and military glory. Therefore,
the development of services, logistics, and
tourism is highly likely to be a priority for
domestic businesses. In addition, economic
strategies of the micro-level will depend on the
international economic cooperation of Ukraine
and the creation of certain regional politico-
military and military-economic regional unions
with Ukraine's participation, because in this case
foreign trade barriers will be lifted, which will
allow enterprises to increase exports of their
products abroad, to attract innovation, etc.
Consequently, the strategic goals of domestic
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enterprises will be to increase their
competitiveness on the national and European
markets, which will require meeting the
standardization requirements of the European
Union, using a blue ocean strategy in the context
of igniting certain niches on the European
market. The main advantage in the context of
achieving the goals of increasing the
competitiveness of enterprises is and will be in
the short term a cheap labor force, given the
impoverishment of the population as a result of
the war.
Conclusions
The study of the economic literature on economic
strategies of developed countries and firms, as
well as a comparative analysis of strategic
planning and policies to achieve the strategic
goals of Poland and Ukraine, gives grounds to
conclude that the basis of economic growth is a
developed sector of processing industry based on
the elements of scientific and technological
progress. From these positions, the new
economic ideology of Ukraine, which should be
adopted during the war and implemented after its
end, should be based on stimulation and support
of industrial production with a high share of
added value. After all, it is in the processing
industry that a large number of jobs are
accumulated, innovations are used, and fixed
capital is accumulated. Besides, it is equally
important to revise the policy of public
expenditures allocated for development
purposes, namely, to increase capital
expenditures of the state budget for the
development of economic infrastructure. At the
same time, it should be noted that without
creating the institutional conditions associated
with reforms of the judicial system, reducing
corruption, improving the investment and
business climate, and the introduction of personal
responsibility for the implementation of
economic strategies certain strategic goals will
not be achieved.
The post-war economic strategies of macro-,
meso- and micro-level should also take into
account the sources and mechanisms of financing
of the strategy implementation, which in addition
to funding from the state budget should use the
funds of the National Bank of Ukraine in the
form of targeted refinancing loans, and on the
ground - crowdfunding mechanisms.
Realistic strategic goals, effective conditions,
and financing mechanisms will allow to
implement of the economic strategies of the post-
war period and achieve economic development
and prosperity in Ukraine.
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