Ukraine: economic recession, threats to democracy and dynamic growth in relations with neighbors

Sergey Gerasymchuk, Foreign Policy Council “Ukrainian Prism”

Subscribe for Newsletter

Download PDF

This summer brought Ukraine not only the long-awaited heat but also quite hot news and developments. Domestic policy news includes failed government policy, prolongation of the so-called adaptive quarantine under late July and persecution of opposition political leaders. The country’s economy witnessed the IMF’s positive decision on the loan, with other international financial institutions joining in. As for Ukraine’s foreign policy, it included statements by the President of Ukraine V. Zelensky on Ukraine’s ambitions to become EU’s full member as well as progress in the state’s relations with NATO. 


Domestic Policy 

Failed mono-majority and adaptive quarantine 

In June, despite many expectations, the country’s parliament failed to approve the updated governmental program. Only 207 MPs supported it, while a minimal number of votes to approve the program is 226. Even pro-presidential mono-majority did not express a vote of confidence to the current Cabinet of Ministers and, therefore, did not provide one-year immunity to the government headed by Denys Shmygal.  Thus, the Cabinet of Ministers is going to be under a constant “threat” of being dismissed at any given moment. However, for many such situation seems more than acceptable. In case of intensifying tensions, the Cabinet of Ministers can be sacrificed. It will play the role of a lightning rod, as did the former government in its own time. Despite such a wake-up call from the parliament, the Cabinet of Ministers continues to carry out its functions, related to, in particular, fighting COVID-19. Yet another time quarantine measures are prolonged until July, 31. Such a step was taken by the executive authorities as a result of a growing number of infected citizens. 

A high-profile incident occurred when it became clear that the opposition may be persecuted. According to a number of local and foreign observers, this may be a sign that Ukraine begins to develop features of a police state. In particular, this situation concerns a number of charges against the fifth President of Ukraine and the head of the current “European Solidarity” party Petro Poroshenko. The incumbent head of state V. Zelensky received many open letters from former political prisoners, historians, public figures and activists. According to them, such actions jeopardize the state’s law enforcement system and Ukraine’s image on the international arena. A number of western political figures also made statements attempting to defend the former head of state including Donald Tusk, the ex-head of the European Council and the head of European People’s party now, Carl Bildt, an influential European politician and the former prime minister of Sweden, as well as several former heads of diplomatic missions in Ukraine. This controversial issue also drew attention of such organization as Ukrainian Congress Committee of America, which issued a statement warning Ukraine’s authorities of selective justice. 


Assistance against the backdrop of unnerving forecasts 

There is no doubt that June’s main economic development was the long-awaited decision taken by the IMF’s Executive Board to approve 18-month US $ 5 billion stand-by arrangement for Ukraine. 

As it was expected, IMF’s decision turned into a signal for many other international partners and donors. In particular, the World Bank approved $350 million First Economic Recovery Development Policy loan to support reforms and help mitigate the impact of the COVID-19 pandemic. 

However, IMF makes no secret of its concerns regarding the development of Ukraine’s economy. According to its forecast, Ukraine’s GDP will go down 8,2% in 2020 instead of previously forecasted 7,7%. 

As for Ukraine’s National Bank (NBU), it echoes IMF forecasts. According to its analysts, actual economic decrease intensified in the second quarter. This is the result of slowly growing consumption and investment demand. Investment decline rate approximately coincides with the rates during 2014-2015 recession. 

Thus being said, NBU enjoys trust of its international partners who insist on keeping the independence of this institution. According to G7 ambassadors, undermining the NBU’s independence “would affect Ukrainians, damage investor confidence, and jeopardize international support for the Ukrainian government’s efforts to achieve a secure, prosperous and democratic country”.  

Despite IMF and NBU, the government’s forecast is far more optimistic. According to the statement made by the Prime Minister of Ukraine Denys Shmygal, the Cabinet of Ministers plans on helping the country’s economy are still actual. The government is doing everything in order to see substantial economic growth in the second half of the year. This is exactly the reason why a decision regarding the adaptive quarantine instead of a full lockdown was taken. 

Foreign Policy

Ukraine only a step away from NATO membership? 

On June 12, Ukraine was granted Enhanced Operating Partner (EOP) status by NATO allies. Among other things this status provides for enhanced dialogue and sharing information, joint interoperability programs and exercises as well as an opportunity for Ukrainian military leaders to occupy positions in NATO International Military Staff and other command structures of the alliance. However, it should be mentioned that “enhanced operating partnership” does not mean NATO membership perspectives, while Hungary, even though it did not block this decision, still has a “veto” on NATO-Ukraine commission top level meetings.

Nevertheless, it should not be left unmentioned that relations with Hungary are gradually getting better. In particular, on June 25 the Ukrainian-Hungarian intergovernmental economic commission meeting took place for the first time in 7 years. 



“On June 12, Ukraine was granted Enhanced Operating Partner (EOP) status by NATO allies”



Optimism is also present in Ukraine’s relations with neighboring Romania. Bucharest decided to approve $2 million aid to help Ukraine fight the coronavirus pandemic and it may be a signal that it is ready to intensify  the dialogue regarding other issues as well. 

Another foreign policy development important to Ukraine was the video conference with the leaders of EaP member states present. The head of Ukraine V.Zelensky, among other things, highlighted Ukrainian ambitions regarding full EU membership. Moreover, Ukraine’s leader expressed his gratitude to the EU for the support it provided, in particular, for the new 1.2 bn euros macro-financial assistance program, which is, according to him, important and timely. 


Photo: The fifth President of Ukraine Petro Poroshenko is facing charges in several cases.

Source: Ukrainian Pravda