Formation of institutional structural determinants of endogenous influence on the level of gross saving in Ukraine

Abstract

The article analyzes domestic institutional structural determinants of gross saving (GS) in Ukraine in order to identify the causes of the critical decline in GS and, accordingly, in gross fixed capital formation (GFCF) in 2019-2021. The diagnosis was made based on indicators of annual and quarterly national accounts of Ukraine with the definition of positive and negative factors influencing GS by institutional sectors, as well as subsectors of nonfinancial corporations and households. This approach made it possible to reveal the hidden causes of the decline in gross saving in Ukraine, as well as the decline in GS capitalization and the deep investment crisis in 2020. The author shows that the shock tariff increase in 2015 provoked a significant redistribution of income and savings between the institutional sectors and their subsectors. It is found that of all structural determinants, fluctuations in the level of GS in the subsector of private nonfinancial corporations are most affected by the changes in the share of gross operating surplus, (GOS) and by the large-scale outflow of financial resources through the property income channel, which varies closely depending on the growth of borrowing. These fluctuations are also affected by zero and abrupt cycles in raising the minimum wage. At the same time, it is proved that the inconsistency of the government's tariff and social policies created a two-fold gap between the statutory social standards and their actual level, which led to significant decline in living standards, especially for the recipients of property income and transfer incoms, turning them into chronic negative borrowers with negative gross saving. This had a negative impact on the GS of the whole household sector. Deepening the analysis to the level of GS structural determinants of the households subsectors shows that the high levels of GS in the subsector of self-employed workers and the subsector of employers do not correspond to the low levels of their gross fixed capital formation, i.e. a significant share of GS of these subsectors does not become a full source of national investment. The author outlines the directions for desired changes in the structural determinants of endogenous impact on the GS level in the household sector and proposes a number of government measures that could positively affect the distribution of income between the institutional sectors and subsectors and, accordingly, the level of GS.