Dutch disease in Ukraine: assessment of the domestic export problems

Economic Annals-ХХI: Volume 143, Issue 7-8(2), Pages: 4-7

Citation information:
Bezrukova, N., & Svichkar, V. (2014). Dutch disease in Ukraine: assessment of the domestic export problems. Economic Annals-XXI, 7-8(2), 4-7. https://ea21journal.world/index.php/ea-v143-01/

Nataliya Bezrukova
PhD (Economics),
Associate Professor,
Yurii Kondratyuk National Technical University
24 Pershotravnevyi Ave, Poltava, 36011, Ukraine
n_bezrukova@mail.ru

Vitaliy Svichkar
PhD (Economics),
Sinior Lecturer,
Yurii Kondratyuk National Technical University
24 Pershotravnevyi Ave, Poltava, 36011, Ukraine
v_svichkar@mail.ru

Dutch disease in Ukraine: assessment of the domestic export problems

Abstract. Introduction. Dutch disease manifests itself in deindustrialization of the economy that occurs when a nation possesses natural resources constituting a significant share in its exports. Its main limit is the growth of the national currency rate due to the improvement in the trade balance, which reduces competitiveness of the manufacturing sector products. However, the symptoms of the Dutch disease may develop when the proportion of the mining sector in national exports grows at a relatively faster pace. An increase in revenues from the export of natural resources contributes to raising the equilibrium exchange rate, thus, limiting competitiveness of other commercial sectors. Purpose. To identify the causes and economic effects of the Dutch disease for Ukraine’s economy and develop proposals to improve the country’s export policy in the context of eliminating the negative effects caused by the fluctuations on the world markets of natural resources. Results. One of the key trends in Ukraine’s economy development in recent years is the export oriented industries priority, mainly the primary ones. Steel production remains a major export industry of Ukraine. Export of steel and other ferrous metals constitutes approximately 30% of the total and is a major source of foreign currency supply. This raises the issue of evaluating the effectiveness of such a course. Raw materials orientation does not provide acceleration of scientific, technical and socio-economic development. Conclusion. The problem of the Dutch disease (i.e. an almost complete lack of competitive products on the world markets of manufactured goods) is particularly acute for Ukraine, and without having provided its solution it is difficult to expect a rapid and sustainable economic growth in the long run. In such circumstances, it is necessary to pursue the public policies aimed at redistribution of income from the raw materials exports to reinvestment in the manufacturing industry, as well as increase innovation funding, primarily in pure science and innovation focused enterprises.

Keywords: Dutch Disease; Export; Deindustrialization; Orientation on Raw Materials Export; Nations Dependent From Natural Resources

JEL Classification: E23; F14; O10; O40

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Received 02.06.2014