European Volatility Makes Economic Development Slower for Ukraine

emerging europe ukraine

Read the Outlook on Ukraine special report


Fabian Zuleeg

About Fabian Zuleeg

Dr Fabian Zuleeg is Chief Executive of the European Policy Centre since 2013. He remains Chief Economist at the same time (a post he has held since January 2010). Fabian holds a PhD on the political economy of EU accession from Edinburgh University. Before coming to the EPC he has worked as an economic analyst in academia, the public and the private sector. He is currently Honorary Fellow at the Europa Institute of the University of Edinburgh and Honorary Professor at Heriot Watt University. His research focuses on the economic and Euro crises, including the reform of the new economic governance at Eurozone level. He also works on the Single Market, Digitalisation, European labour markets and the EU budget.

In the current geostrategic environment, it is impossible to divorce political development from economic development. The prospects for the global economy and, by implication, for individual economies are intricately driven by significantly changing and unpredictable geopolitical trends.

The main effect of these developments is a rise in volatility. This does not mean that, in all cases, the current trends will have negative impacts. In many cases, we will also see positive surprises, accompanied by, for example, a (temporary) boost in consumption and investment. But, in the end, uncertainty and volatility will carry a cost, not least in terms of confidence and in an increasing tendency to seek safety by withdrawing behind one’s own borders.

This increasing tendency towards more closed economies and societies is also threatening the rules-based international system. There is a realistic risk of a challenge to the multilateral trading system, with the WTO potentially being undermined by trade wars. Even if this is not the case, it is likely that in such volatile times, investment will tend to seek safe havens in economically and politically stable countries. This movement will be even more pronounced if there is uncertainty over the future of the global security architecture, and geopolitical tensions in critical regions. Questions on the future of NATO, and the role of Russia, expose the precariousness instability of the current strategic context in the regions surrounding the EU.

There is also significant uncertainty over the economic and political development of the European Union. The rise of populism, fuelled by an increasing polarisation within European societies, is creating political risks that are especially pronounced for the EU, which does not have a sufficient political connection to Europe’s citizens, making it vulnerable to anti-establishment, anti-globalisation and anti-migration rhetoric. More closed and nationalistic leaders are vying for power, and, increasingly, these arguments are reflected in the mainstream.

Europe remains gripped by a poly-crisis — economic/Economic and Monetary Union (EMU), migration, Brexit, security — that is very difficult to resolve in light of fragmentation, and increasing distrust between member states, as well as vis-à-vis the EU’s institutions. This also makes the EU less able to engage with its neighbours, as shown by the ‘moratorium’ on further enlargement.

The reluctance to further enlarge the EU also comes from a widespread perception that, in the past, countries were allowed to enter the EU before they were fully ready. As ex post mechanisms are much weaker than ex ante conditionalities, many believe that countries can be permitted to enter the EU only when they have clearly managed to create the stable institutions that are needed in the long term.

Given these global developments, as well as the current state of the EU, the economic environment will be very challenging for countries that have to deal simultaneously with significant external and internal political and economic volatility, as well as having weak institutions.

Despite Ukraine’s economic potential, the economy remains inherently unsustainable and it is heavily dependent on external finance, including that from the IMF, EIB and ECB. While there will continue to be financial support, it remains questionable whether this will reach a sufficient scale, nor does it represent a sustainable solution to the structural economic challenges. In addition, while a number of important economic reforms have been carried out, broad-based recovery and growth have been held back by several factors including weak external demand and the conflict in the East of the country which have restrained investor confidence and productivity.

While Ukraine is now implementing a Deep and Comprehensive Free Trade Area with the EU, economic integration will be limited by low investment flows and the difficult global economic environment. Nevertheless, the process helps Ukraine approximate its legislation and technical standards to those of the EU.

In the end, this points to relatively slow economic integration and development. A crucial pre-condition of reaching even limited growth rates will remain the further strengthening of internal institutions — not least the judiciary — as well as (painful) structural and sectorial reforms. However, in the current more negative global environment, even a modest and slow economic development process might be seen as a success story.


The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.


Let’s Stop Wasting Time Redefining our Place in Europe

Ukraine’s Tech Sector Is Booming but Needs Awareness and Confidence

ukraine tech emerging europe

Europe’s Breadbasket Offers Opportunities for Investment and Diversification

There Is a Move Towards Change in Ukraine

Ukraine Returns to the Fold

LVOV UKRAINE - APRIL 25: Workers masons laid paving stones in the repair of the main street on April 25 2013 in Lviv Ukraine

Leszek Balcerowicz: Ukraine Can Learn from Poland’s Economic History

International Women’s Day — Let’s Take Action And Then Celebrate

Examining How a Strong Swiss Franc Could Single-Handedly Topple Poland’s Economy

Ukraine and Canada: A History of Settlement and a Future for Investment

Is there any prospect of ‘Polexit’?

poland european union polexit

Steps to Stability Marred by a Failure to Attract FDI

Can Armenia Keep a Foot in Both Camps?

European union armenia russia emerging europe

Ukraine Continues to Make Waves as an IT Outsourcing Destination

The Global Outsourcing Industry — the Rise of the Phoenix

Will a Two-speed European Union Side-line the Visegrad Four?

FocusEconomics: Predicting an Increase for the Ukrainian Economy

Ukraine’s Economy in 2017 — When Dreams of Growth Meet Geopolitical Reality

Stuck in Neutral: Georgia’s Constitutional Reforms

Tbilisi Parliament Georgia

People Power Reminds the Government of the Rule of Law

The Capital Markets Union: a New Beginning in the European Financial Sector?

The Dilemmas of Ukraine’s Economic Policy

Good Match But Unlikely Marriage

Where’s My Cheese? – The GREAT British Food Tour 2014

Cheese Shop

Is the Level of Foreign Ownership a Problem in Emerging Europe?

Flags of European countries flying from their capital cities. Viewed from the South.

The Human Factor is Boosting Ukraine’s Promising IT Export Sector

Poland’s Capital Saturation Lower Than the Czech Republic’s

deloitte fdi poland

Adam Smith’s Warning for Poland

A Positive and Modern View of Entrepreneurship

The EU’s Benign Neglect Of Eastern Europe

The Voice of European Business Must Be Heard Loud and Clear by Brexit Negotiators

China: A Giant That Is Hard to Crack

United or Divided? Europe in the Face of the Challenges of Tomorrow

Energy Tariff Reform in Ukraine: Estimated Effects and Policy Options

Poland’s Unicorn, Slovakia’s Flying Car and the Future of Europe

After Its Significant Rise the Georgian Economy May Now Fall

Panorama of Tbilisi, Georgia in sunset rays. Vivid, saturated, splittoned image.

Global Expansion in the Digital Age

CEE-Benefits and Disadvantages of Joining the Eurozone

forint zloty euro

Office Space Remains Available in Kyiv

Ukrainian Start-up Projects Recognised in the International Market but Still More Investors Needed

Startup Diversity Teamwork Brainstorming Meeting Concept

‘Viking’ is Yet Another Way to Annoy Ukraine

When Neutrality Isn’t an Option

President of the Russian Federation Vladimir Putin

Central and Eastern European Consumers Are Joining the Global Trends for Change

Albania’s Election Apathy

tirana albania

The Ukrainian Banking Sector Looks Set to Regenerate New Growth

Hungary’s Nationalist Assault on Free Enquiry

victor orban ceu

Polish Tax Laws — Fighting a Winning Battle Against Tax Evaders

The Innovation District IT Park Will Help Lviv Become CEE’s IT Hub

IT park lviv ukraine

History as Destiny? Institutional Erosion in Ukraine and Poland

Ukrainian Venture Investment Market Is Immature and Needs Growth

Lviv Is the Pearl and the Soul of Ukraine

Ukraine’s Pro-change Atmosphere Says “Welcome!”

lviv emerging europe

Belarus 2020: Turning the Vicious Circle Into an Upward Spiral

Europe at Odds over OPAL and Nord Stream 2

Falling into Old Ways in 2017? Ukraine’s Struggle for Functioning Economic Institutions

Governmental Support is Vital to Fight Corruption

Poland’s Confusing GDP Growth

Ukraine Is Energy Independent in Some Sectors and Awaiting Change in Others

SMEs Should Play an Important Role in the Economy and Export Development

Danish companies Support and Assist Ukraine’s Economic Transition

President of Ukraine Petro Poroshenko and Prime Minister of the Kingdom of Denmark Lars Lokke Rasmussen during a meeting in Kiev Ukraine

Thinking Big; Working Hard; Delivering Value to Clients and Building Relationships

quartsoft emerging europe outsourcing

Brexit: Let’s Learn the Lesson and Hope a Better Europe Will Arise

Political Tensions Rise As Croatia Allegedly Breaks the Dublin III Refugee Regulation

croatia migrants

Big Fish, Small Fish, Where to Fish? On the Eve of the Fourth Industrial Revolution

The EU’s Choice: Fundamental Reform Or Disintegration

Partnership is the Key to CEE-Indian Business

Poland Needs to Cling to the Eurozone

zloty euro emerging europe

Not All Quiet on the Eastern Front

Swimpassing Dniester Without Prejudice To Democracy

Parliament of the republic of moldova in chisinau, national flag, stefan cel mare street, spring time with blue sky

A Very Good Prospect for Future Biogas Development

Past Troubles Belie the Opportunities for Investment

Azerbaijan: The Rich Get Richer and the Poor Get Nothing


Ukraine’s Reputation for Cheap Labour May Not Ring True in the Long-term

Serbia’s New PM Is Cut From a Familiar Cloth

Serbian flag emerging europe

Europe Needs To Be More Proactive In Embracing Armenia

The Sharing Economy Could Bring New Business Models to CEE

Czech Own Currency Insures Against Euro Losses

Euro Czech republic emerging europe

The GREAT London Food Scene

Bakery in London

How strong is V4?

Viktor Orban

Sirin Software — A Ukrainian Firm Conquering Global Markets

How Will Poland Approach the Brexit Negotiations?

The CEE Region Is Making Advances in Prioritising Waste-to-Energy Projects

Macedonia’s Controversial Coalition Government

SKOPJE MACEDONIA emerging europe

The Stalled Conflict in Ukraine Will be Formalised

The Long Tail of Global Expansion

Breaking With Imitations of the Past

Could the West At Least Help Ukraine To Insure FDI Against Political Risks?

Emphasising the Incongruence Between the V4 Countries

Macron emerging europe

The Competitive Edge in Central and Eastern Europe

SOFIA BULGARIA - MAY 5: View of the Ivan Vazov National Theatre in Sofia on May 5 2016. Sofia is the largest city and capital of Bulgaria.

Slovenia’s Presidential Election: Pahor Expected to Romp Home

Slovenia flag against blue sky waving in wind

After 25 Years of Restructuring, the Romanian Power Sector Is at a Crossroad

Protecting Intellectual Property to Encourage Business Confidence

The Political Economy of Independent Ukraine: Late Starts, False Starts, and Last Chance?

Defending EU Values in Poland and Hungary

Eu hungary poland

Prepare for a New Europe

Is the CEE Region About to Steal the Outsourcing Crown From India?

Amazing view on the Taj Mahal in sunset light with reflection in water. The Taj Mahal is an ivory-white marble mausoleum on the south bank of the Yamuna river. Agra Uttar Pradesh India.

Changes Are Needed in Ukraine’s Economy and Business to Catch up with CEE Growth

Maidan Three Years On—What Has Changed for Ukraine?

Military Operations in Ukraine Have Had Some Surprisingly Positive Side Effects for Modern Businesses

Night city reflection on the river in Donetsk. Ukraine

Old Fashioned Skulduggery Overshadows the Elections in Moldova

Romania Surviving the Waves of Recent Political Tsunamis in Europe

Moldova Falls Victim to Politicising

moldova emerging europe

E-lifestyle and Cyber Security: Some Views From Estonia

Cyber Security Protection Firewall Interface Concept

Bulgaria Needs a Reform-Oriented Government to Take Full Advantage of its EU Membership

bulgaria emerging europe

Only a United Opposition Can Defeat Poland’s Ruling Law and Justice Party

Classical building of Polish parliament. Warsaw in Poland.

Anti-corruption Efforts Are the Starting Point for Further Reforms

Ukraine’s Talented Students Are Well Served by Its Diversified Business Relevant Education

ukraine IT

Nagorno-Karabakh Conflict Moves from Frozen to Kinetic


Poland’s Business Experience Makes it a Good Neighbour to Ukraine

Ukraine’s NIX Solutions Expands to Israel and Beyond

Hungary and Israel: the Collision of Past and Present

Budapest synagoge

Resignation in Ukraine: War, Revolution, Crisis — Some Things Never Change

A New Division Between Eastern And Western Europe?

Will Poland Leave the European Union?


Ukraine’s Government Declares Ambitious Privatisation Targets

Ukraine Outsourcing’s Value is Now in its Technological Expertise and Reliability

See the New Ukraine and Benefit From the Best by Partnering or Investing in IT

Engineer proceeding to data recovery from computer

Longstanding Early Investors Say Ukraine Offers Foreign Manufacturers Great Prospects

ukraine manufacturing

EU Visa-Liberalisation Strengthens Georgia’s Pro-Western Path

georgia emerging europe eu

Belarusian Journalists Still Face Huge Problems

Poland: Is it Ready, and is it Time to Adopt the Euro?

Ukrainian Agribusiness — a Jewel in a Crown

Wheat ukraine agriculture ebrd

Impact of Brexit on EU-CEE Not Overstated

theresa may brexit

Between the East and West, Geographically and Politically

Why Hungary’s New NGO Law Is Harmful for Business

Budapest, Hungary. Aerial view of the old city Budapest, Hungary with river and Parliament Building with cloudy blue sky

Regional Relations in the Western Balkans: Moving Beyond Folklore

Bosnia and Herzegovina flag with Serbia flag, 3D rendering

LGBT in CEE — A New Acceptance Is Being Born From Migration

Czech Republic Renaming Has Real Economic Costs

Start Making Connections for the Opportunities Ukraine is Currently Offering

Kharkiv region Ukraine - July 29 2016: Combine harvests wheat on a field in Kharkiv region Ukraine on July 29 2016

Poland’s Drift Away From Democracy

Denmark in Ukraine: Fostering a Better Business Climate for Both Sides

Ukraine Is Offering Europe Unique Combat and Technological Experience

From a Small Family Firm to a Top 100 Global Outsourcing Company

We, the Post-Communist Generation, Have the Skills to Rid of the Past And Create Our Own Future

Ukraine’s Banking Sector Reconstruction Brings Asset Sales and Opportunities in Equal Measure

Gavel and Ukrainian hryvnias on a wooden table

Ukraine’s Gas Industry Risks Stagnation Without Investment

A Bosnian Referendum Shows Russia’s Influence in the Balkans—As Well As Its Limits

The Right to Water: Who Can Change Today’s Situation?

Are There Differences Between How Tax Regulations in Poland and IAS Treat Intangible Assets?

Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

January Kicks Off an Exciting Year for Emerging Europe

Poland Challenges the European Identity

Poland emerging europe

Ex-Transition Economies’ FDI Recovery

dollar euro fdi

CEE — Do We Need a Launch Pad For Our On-Site Tech Intelligence in the Silicon Valley

Fiscal Policy Predictability in CEE — It’s Time for Change

The Eurovision Song Contest Is a Perfect Showcase for Ukraine’s Talent and Warmth

A Roadmap for Reform in Ukraine and a Promise of EU Support

Are Labour Shortages Driving Economic Growth?

Outsourcing in Germany: Stop Talking at and Start Talking to

Measuring Growth of Societies with GDP Alone Shows an Incomplete Picture

Western Ukraine Could Be an Entry Point into the Country

Business Moving Forward with Cautious Optimism — Can Investors Win the Confidence Game?

Changes Are Making Ukrainian Banking More Aligned with International Standards

The Morawiecki Plan Promises a Brighter Future for Poland

Naftogaz: A Good Start Has Slowed But Optimism Remains High

Closeup of pressure meter on natural gas pipeline with people on the background

The Netherlands’ Objection to the Ukraine-EU Association Agreement could be Costly to Europe

2018 Elections — Vital Decisions for Hungary’s Future

Victor Orban energing europe

EU-CEE Is Still Growing at a Healthy Rate

Prague emerging europe

Finalising the DCFTA is Expected to Bring Multiple Benefits to Ukraine

Kyiv’s Mayor Is Used to Fighting to Attract Attention and Interest

KIEV UKRAINE - SEPTEMBER 8 2016: The facade of Kievrada the City Council located in Khreshchatyk Avenue on September 8 in Kiev.

Changing Perspectives and Showing That True Romania is a Vibrant Innovative Country

Legal Reforms are Improving the Existing Problematic Situation in the Ukrainian Agro Market

ukraine agriculture

How Will Trump’s Visit Affect Polish Politics?

Donald trump

Under Promise, Over Deliver: Prospects for the EU’s Eastern Partnership in 2018

Eastern partnership

PiS Uses Media Control to Bring Poland to Heel

Jaroslaw kaczynski pis emerging europe

Leave a Reply

Your email address will not be published. Required fields are marked *