NECESSARY STEPS FOR THE DEVELOPMENT OF UKRAINE'S ECONOMY AND BANKING SECTOR DURING AND AFTER THE CORONAVIRUS CRISIS

Abstract

The COVID-19 epidemic in Ukraine and around the world has led to unprecedented restrictive measures by countries to counter the spread of viral diseases and support national health systems. At the same time, the quarantine measures introduced in Ukraine rather exposed and deepened the negative trends in the economy, which have been observed since the second half of 2019. In the first nine months of 2020, Ukraine\\\\\\\\\\\\\\\'s real GDP fell by 5.4% and consumer inflation last year was below the target range of the NBU, which indicates signs of full-fledged stagnation in the real sector of the economy. The efficiency of the financial intermediation and monetary transmission in Ukraine remains low. The stagnation of bank lending has been going on for the third year in a row, and the measures taken by the NBU to stimulate the economy have not been effective enough. The loan-to-deposit ratio is following the downward trend since 2015. The risk of lower revenues of the state budget of Ukraine and increasing the cost of government borrowing significantly complicates the implementation of state programs to support the economy. The lack of sufficient fiscal space to finance public expenditures at an affordable cost puts Ukraine on an unequal footing with the countries of Central and Eastern Europe in the context of overcoming the crisis. In order to counter the COVID-19 crisis, countries use a combination of government fiscal mechanisms with monetary and macroprudential instruments of central banks. Given the risk of a vicious cycle of deterioration of the financial condition of the banking and corporate sectors in Ukraine, authors justified a comprehensive approach to improving public economic and financial policy, which will synergize the effect of the measures taken and ensure long-term sustainable growth of Ukraine's economy based on effective credit support of the banking system.