Expert Ihor Burakovsky says Ukrainian government will have to review state budget for 2009

Kyiv, February 2 (Interfax-Ukraine) – The state budget of Ukraine for 2009 requires changes both large and small following the downturn in the national economy, Director of the Institute for Economic Research and Policy Consulting Ihor Burakovsky has said.

"The government will certainly have to review the budget, be it officially or unofficially… The budget will be seriously amended," he said at a press conference at the Interfax-Ukraine news agency on Monday.

Burakovsky said that there are grounds to cut a number of budget expenditures to ensure pensions and other social payments are made.

He said that Ukraine is restricted in its ability to use eased tax pressures as an anti-crisis tool.

Speaking of the prospects for the national economy, Burakovsky said that Ukraine would face most problems in the first quarter of 2009. He said that the country's economic growth would be restored only after there are positive trends in global economy.

In this connection, the expert said that another surge of the crisis is forming, as the recession in the real sector of the international economy creates a new factor negatively influencing the situation in the financial and banking spheres.

Burakovsky said that deflation, linked to the global economic recession, could soon turn into inflation (under pressure from financial assistance from the state to private companies).

In general, he said that it is still difficult to talk about a date for the revival of the global economy, as considerable fluctuations of currency exchange rates on the international markets are evidence of growing uncertainty.

"Regarding any positive expectations in the future, they, as a rule, have been postponed by all experts until 2010," he said.

Burakovsky said that international financial organizations would again worsen macroeconomic outlooks.

According to the documents provided by the institute to journalists attending the press conference, worsened problems with unemployment in the developed countries is expected to cause a cut in money transfers from individuals working abroad to Ukraine. Moreover, some migrant workers could return to Ukraine, and the national labor market will be incapable of satisfying the demand for jobs.

Burakovsky also said that international "trade wars" might be waged due to the economic downturn. He said that the new U.S. anti-crisis stimulus package foresees the implementation of major infrastructure projects in the country using only U.S. products, which might trigger a "trade war" between the United States and the European Union and worsen the positions of Ukrainian producers.

In this connection, the expert called on Ukrainian companies to focus more on countries whose economies have been the least hit by the crisis, particularly India, China and the Arab states.

Speaking about long-term prospects, he stressed the importance for Ukrainian exporters of preparing for serious competition with producers in other countries during the period of the revival of growth in the global economy.

Burakovsky said that reforms in Ukraine had in fact ended in 2002, making the rapid revival of economic growth in the country after the international economy levels out more difficult.

He also spoke of the prospects for certain economic branches in Ukraine. He said that the hryvnia devaluation creates problems for car importers, whereas difficulties with the clearance of car loans could give a boost to the secondary car market.

Commenting on the situation in steelmaking, Burakovsky said that the devaluation of the national currency had supported the industry, but a decrease in requests for steel products continues at steel mills. In this connection, the expert said that it would be expedient to use this "break" to upgrade production capacities.

Speaking of the country's chemical industry, he said that the greatest difficulties would be caused by the recent rise in gas prices.