Economy

For Ukraine, 100% of public debt to GDP is already a problem, says economist

Ukraine’s national debt has grown by almost a third over the year and exceeded 9 trillion hryvnia. Is this figure critical for the economy and, more importantly, is it the structure of the debt or its ratio to GDP that matters? Andriy Novak, head of the Committee of Economists of Ukraine, discussed this in an interview with the YouTube channel "Komersant Ukrainian".

The economist emphasizes that the key factor is not the existence of debt itself, but its ratio to GDP.

“The issue is the size of the debt relative to the country’s economy, i.e., to GDP. Moreover, this ratio is critical for different countries in different ways. That is, for us, for the Ukrainian economy, even without taking the war into account, 100% of public debt to GDP is already a problem. Currently, we have almost 99%, but this is mainly due to the war,” he said.

For comparison, Novak cites examples of developed countries. In Japan, public debt exceeds 200% of GDP, and in the US, it is over 150%, but this is not critical for these economies due to their scale, technological capabilities, and global demand for their products and currency.

Novak draws attention to the structure of Ukrainian exports, which consist mainly of raw materials and minimally processed products. This, in his opinion, makes the debt burden heavier for the country.

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“If the VAT refund mechanism is applied only to finished Ukrainian goods, it will encourage capital owners, the owners of these enterprises, to invest and build processing enterprises.

Our task is to maximize processing and added value at Ukrainian enterprises so that we enrich the structure of our economy and it does not remain a raw material appendage for developed economies,” Novak emphasizes.

Thus, according to the economist’s assessment, the issue of public debt for Ukraine is not only about numbers, but first and foremost about the quality of the economy and its ability to create added value within the country.

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