Macroeconomics-I

Quiz I

Team:

Iulia Liuba
Danylo Tavrov
Yurii Sviatkovskyi
Task 1
According to the task given in the assignment, the data on GDP per capita in constant
2010 US dollars for Ukraine and neighboring countries were downloaded from the database of
the World Development Indicators provided by World Bank. The following countries were
included in the sample: Ukraine, Russian Federation, Belarus, Republic of Poland, Hungary,
Slovak Republic, Romania, and Moldova. As the data in constant 2015 US dollars were
unavailable, 2010 numbers were taken instead.
GDP levels for each country are provided in Table 1 (all the numbers in this report
are given with the two decimal points precision) and visually depicted in Fig. 1.
Table 1 – GDP per capita in constant 2010 US dollars for Ukraine and neighboring countries
Ukraine Belarus Russia Slovak Republic Poland Moldova Romania Hungary
1987 4020.58 N/A N/A N/A N/A N/A N/A N/A
1988 4105.52 N/A N/A N/A N/A N/A N/A N/A
1989 4243.77 N/A 9867.37 N/A N/A N/A N/A N/A
1990 3965.38 3102.97 9534.50 N/A 5947.46 N/A 5345.85 N/A
1991 3624.29 3064.23 9033.07 N/A 5510.63 N/A 4695.88 8813.61
1992 3263.37 2764.10 7717.09 7675.59 5631.92 N/A 4323.06 8546.89
1993 2797.57 2548.29 7056.16 7791.73 5827.62 N/A 4395.14 8507.35
1994 2166.69 2252.78 6176.87 8242.70 6123.13 N/A 4574.59 8770.07
1995 1917.45 2025.03 5919.34 8698.87 6539.91 1086.94 4911.07 8913.10
1996 1741.09 2088.70 5714.55 9267.03 6930.73 1025.11 5115.83 8928.92
1997 1704.31 2336.70 5804.14 9811.18 7373.60 1045.85 4883.49 9242.70
1998 1686.94 2545.05 5505.63 10191.11 7711.11 977.82 4791.46 9655.09
1999 1699.52 2642.68 5876.15 10159.83 8069.75 946.37 4779.72 9992.79
2000 1818.00 2809.16 6491.00 10296.71 8526.27 968.29 4900.54 10439.81
2001 2005.32 2957.03 6850.52 10657.69 8635.06 1029.65 5247.29 10858.70
2002 2130.66 3126.05 7208.57 11143.76 8815.44 1112.54 5621.29 11380.03
 Ukraine Belarus Russia Slovak Republic Poland Moldova Romania Hungary
2003 2349.93 3369.73 7769.67 11755.35 9135.65 1189.31 5974.77 11849.52
2004 2654.33 3781.26 8360.81 12376.06 9610.44 1280.49 6511.17 12470.22
2005 2746.05 4165.05 8927.91 13210.27 9950.57 1379.88 6824.82 13042.69
2006 2966.50 4609.69 9687.49 14326.26 10572.18 1450.13 7418.42 13566.69
2007 3220.01 5029.15 10532.33 15868.80 11322.05 1497.10 8045.58 13648.64
2008 3311.96 5561.30 11089.93 16747.81 11801.59 1616.95 8872.78 13794.14
2009 2834.34 5584.86 10219.52 15818.56 12126.20 1521.86 8314.74 12908.72
2010 2965.14 6030.39 10674.99 16600.61 12599.52 1631.54 8297.48 13025.53
2011 3138.47 6376.39 11121.51 17046.61 13224.48 1743.49 8426.47 13289.71
2012 3153.74 6492.74 11493.40 17299.63 13436.98 1731.51 8518.32 13144.45
2013 3160.08 6558.19 11615.70 17538.65 13632.09 1894.78 8851.96 13459.75
2014 3123.92 6665.19 11493.73 17972.09 14090.12 1986.94 9158.52 14042.28
2015 2828.89 6399.74 11144.60 18642.89 14641.57 1980.27 9564.09 14518.84
2016 2905.86 6218.74 11099.17 19237.95 15048.98 2062.68 10080.97 14840.39
 GDP per Capita (Constant 2010 US Dollars)
20000

18000

16000

14000

12000

10000

8000

6000

4000

2000

Ukraine Belarus Russia Slovak Republic Poland Moldova Romania Hungary

Fig. 1 – GDP per capita levels for Ukraine and neighboring countries
in constant 2010 US dollars
Task 2
Using the data from Table 1, the average annual GDP per capita growth rates were
calculated for each country (Table 2). By average in this case we took arithmetic mean
because it is more justified for data measured on ratio scale, and because there are no
obvious outliers, in which case median would suit more. All the annual growth rates are
given in Table 3.

Table 2 – Average growth of GDP per capita in constant 2010 US$ for Ukraine, its
neighboring countries, and the U.S.
Country Average growth
Ukraine -0,73%
Russia 0,66%
Belarus 2,14%
Poland 2,62%
Slovak Republic 2,95%
Hungary 3,22%
Romania 3,67%
Moldova 3,95%

From the graphical representation of Table 2 (Fig. 2), we can unequivocally conclude
that Ukraine is an outsider, exhibiting negative growth. In our view, this can be accounted
for a number of reasons, the most contributing to the overall decline of the economy being:
 lack of political will to implement necessary economic reforms, leading to
unacceptable level of red tape throughout the economy, including burdensome regulations
and abundant paperwork;
 extremely high level of corruption that hampers economic growth as a result of
ineffective usage of budget funds. In addition, large share of underground economy leads to
tax evasion and hence budget deficit;
 political instability and incoherent economic policies of the central government
entail worsening of investment climate and decreasing economic competitiveness.
Regarding the rest of the countries, the following observations can be made:
 all of the countries in the region, except for Russia, show only modest results,
their annual growth ranging from 2 to 4%;
 Russian Federation falls behind this trend significantly, with only 0.67%;
  countries with low base GDP level (such as Moldova and Belarus) grew with
approximately the same pace as countries with a higher one (such as Poland and Slovak
Republic), which indicates that the former countries seemingly didn’t make the full use of
the initial conditions they had.

GDP per Capita Average Annual Growth Rates, %

4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Ukraine Russia Hungary Romania Belarus Moldova Poland Slovak
-0.50%
-1.00%

Fig. 2 – GDP per capita average annual growth rates for Ukraine and neighboring
countries (constant 2010 US dollars)
Table 3 – GDP per capita average annual growth rates for Ukraine and neighboring countries (constant 2010 US dollars)
Ukraine Belarus Russia Slovak Republic Poland Moldova Romania Hungary
1987 2.11% N/A N/A N/A N/A N/A N/A N/A
1988 3.37% N/A N/A N/A N/A N/A N/A N/A
1989 -6.56% N/A -3.37% N/A N/A N/A N/A N/A
1990 -8.60% -1.25% -5.26% N/A -7.34% N/A -12.16% N/A
1991 -9.96% -9.79% -14.57% N/A 2.20% N/A -7.94% -3.03%
1992 -14.27% -7.81% -8.56% 1.51% 3.47% N/A 1.67% -0.46%
1993 -22.55% -11.60% -12.46% 5.79% 5.07% N/A 4.08% 3.09%
1994 -11.50% -10.11% -4.17% 5.53% 6.81% N/A 7.36% 1.63%
1995 -9.20% 3.14% -3.46% 6.53% 5.98% -5.69% 4.17% 0.18%
1996 -2.11% 11.87% 1.57% 5.87% 6.39% 2.02% -4.54% 3.51%
1997 -1.02% 8.92% -5.14% 3.87% 4.58% -6.50% -1.88% 4.46%
1998 0.75% 3.84% 6.73% -0.31% 4.65% -3.22% -0.25% 3.50%
1999 6.97% 6.30% 10.46% 1.35% 5.66% 2.32% 2.53% 4.47%
2000 10.30% 5.26% 5.54% 3.51% 1.28% 6.34% 7.08% 4.01%
2001 6.25% 5.72% 5.23% 4.56% 2.09% 8.05% 7.13% 4.80%
2002 10.29% 7.79% 7.78% 5.49% 3.63% 6.90% 6.29% 4.13%
 Ukraine Belarus Russia Slovak Republic Poland Moldova Romania Hungary
2003 12.95% 12.21% 7.61% 5.28% 5.20% 7.67% 8.98% 5.24%
2004 3.46% 10.15% 6.78% 6.74% 3.54% 7.76% 4.82% 4.59%
2005 8.03% 10.68% 8.51% 8.45% 6.25% 5.09% 8.70% 4.02%
2006 8.55% 9.10% 8.72% 10.77% 7.09% 3.24% 8.45% 0.60%
2007 2.86% 10.58% 5.29% 5.54% 4.24% 8.01% 10.28% 1.07%
2008 -14.42% 0.42% -7.85% -5.55% 2.75% -5.88% -6.29% -6.42%
2009 4.61% 7.98% 4.46% 4.94% 3.90% 7.21% -0.21% 0.90%
2010 5.85% 5.74% 4.18% 2.69% 4.96% 6.86% 1.55% 2.03%
2011 0.49% 1.82% 3.34% 1.48% 1.61% -0.69% 1.09% -1.09%
2012 0.20% 1.01% 1.06% 1.38% 1.45% 9.43% 3.92% 2.40%
2013 -1.14% 1.63% -1.05% 2.47% 3.36% 4.86% 3.46% 4.33%
2014 -9.44% -3.98% -3.04% 3.73% 3.91% -0.34% 4.43% 3.39%
2015 2.72% -2.83% -0.41% 3.19% 2.78% 4.16% 5.40% 2.21%
2016 -0.73% 2.95% 0.66% 3.95% 3.67% 3.22% 2.62% 2.14%
Task 3
Based on data in Table 1 and analogous data for the United States (Table 4), several
descriptive statistics were calculated for each country of the country (Table 5).

Table 4 – GDP per capita levels for the United States in constant 2010 US dollars
Year The U.S. Year The U.S. Year The U.S.
1987 4020.58 1997 1704.31 2007 3220.01
1988 4105.52 1998 1686.94 2008 3311.96
1989 4243.77 1999 1699.52 2009 2834.34
1990 3965.38 2000 1818.00 2010 2965.14
1991 3624.29 2001 2005.32 2011 3138.47
1992 3263.37 2002 2130.66 2012 3153.74
1993 2797.57 2003 2349.93 2013 3160.08
1994 2166.69 2004 2654.33 2014 3123.92
1995 1917.45 2005 2746.05 2015 2828.89
1996 1741.09 2006 2966.50 2016 2905.86

Table 5 – Descriptive statistics for GDP per capita levels for Ukraine, neighboring countries,
and the United States (constant 2010 US dollars)
Country Mean St. Dev. Relative St. Dev. Maximum Minimum
Moldova 1416.34 373.39 26.36% 2062.68 946.37
Ukraine 2808.32 759.59 27.05% 4243.77 1686.94
Belarus 4115.01 1672.46 40.64% 6665.19 2025.03
Romania 6609.09 1894.72 28.67% 10080.97 4323.06
Russia 8713.78 2151.01 24.69% 11615.70 5505.63
Poland 9734.63 3073.19 31.57% 15048.98 5510.63
Hungary 11601.95 2154.88 18.57% 14840.39 8507.35
Slovak 13135.11 3820.53 29.09% 19237.95 7675.59
Republic
The U.S. 44012.58 5875.69 13.35% 52194.89 35083.97
 According to the data in Table 5, it is evident that, on average, the U.S. GDP per
capita is tremendously higher that in Ukraine and its neighbor countries. In addition, as
relative standard deviation (RSD) clearly shows, the U.S. economy exhibited much lesser
overall fluctuations for the given period than other countries. Other countries are
characterized by more volatile economies, especially Belarus with its 40.64% RSD.
Task 4
Having reviewed Ukraine Economic Update — April 2017 published by World Bank,
we summarized it as follows.
After drastic 16% drop in the previous 2 years, a slight 2.3% growth finally took
place in 2016, rich harvest playing the most significant part of it. Quarter 4 accounts for
the major part of the upsurge, providing a 4.8% sector raise. Other sectors contributed as
well, while education, health, financial services sectors, and insufficient exports drag
national economy down.
The economy shows signs of recovery from the disastrous 22% poverty rate of 2015.
Effective monetary policy led to reduction of inflation rate, while real wages acceleration
made general contribution to recovery. However, every 10th Ukrainian of labor force
remains unemployed.
Low social security contributions entailed budget deficit growth in 2016, with pension
deficit remaining the major fiscal weakness. Nevertheless, tax inflows grew over the year, but
fiscal deficit is going to grow in 2017, due to increase of minimum wages. We need structural
reforms to consolidate fiscal policy and reduce public debt.
Predictions for Ukrainian economy growth of 2017 are 2%. Nothing more is expected,
as global economy still struggles to pick up the pace. Also, Donbas crisis remains unresolved,
freezing the coal mining and general trade. Medium-term predictions of 4% growth require
investor-attractive environment and increase in competitiveness.