Opinion

What is driving inflation the most right now

Paying attention to industrial inflation is no less important than consumer inflation, because consumer prices, export competitiveness, etc. depend on industrial prices

Andriy Dligach

Chairman of Advanter Group, Founder and Chairman of Kyiv Foresight Foundation, Global Ambassador of Singularity University

July 29, 15:16

What caused the significant increase in industrial inflation? Components for Ukrainian manufacturers are becoming more expensive, exports are growing significantly slower than imports, the cost of human resources is increasing, major problems with electricity and logistics, in particular, lead to a decrease in the utilization of production capacities and a decrease in the effect of scale, in the end, a worse harvest than last year is predicted - these are all factors, which negatively affect the economic situation in the country.

So, in particular, before the large-scale aggression, the utilization of production facilities was 75%. At the end of last year, this figure fell to 45%. Now the occupancy rate is 38%. 35% is predicted in winter. The lower the utilization of production facilities, the higher the cost of production. There was also a reduction in staff at enterprises. Only 74% of vacancies are filled as businesses are losing qualified employees.

Another reason for the current inflation is the delay in opening business access to loan and investment resources. Capital investments have also fallen significantly.

Only 17% of enterprises report that they are prepared for further power outages. The main problem is the lack of funds to ensure the energy sustainability of business.

Therefore, the bill on increasing taxes needs a detailed professional discussion. You can't kill business with taxes if we want to develop the economy. This move will be devastating for the economy and undermine the country's defense capabilities.

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I am convinced that the war is an incentive for rapid radical reforms. Time for fundamental changes. What reforms are currently most needed?

These are customs reforms, administration in the tax system, reform of the Criminal Procedure Code, bringing order to the public procurement system, judicial reform.

However, we must involve civil society, analytical centers and business associations in the creation of economic policies of the state, on the basis of which bills will then be created.

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