The value of the Index of Current Economic Capacity (Index) in November 2017, compared to October 2017, has dropped markedly by 4.5 points, that is from 97.4 to 92.9 units.
This decrease (that should be interpreted as a deteriorating economic capacity of Ukrainians) is mainly due to the following factors:
- despite the increase in average nominal wages in October, (from UAH 7352 to UAH 7377 — i.e. by 0.4%), the accelerating inflation led to a 0.8% decline in the real wage index, and high ratio between the subsistence minimum, minimum wage and overage wage has been unchanged;
- high levels of wage arrears remain unchanged since September (around UAH 3.5 billion), while the share of arrears generated by economically active enterprises is exceeding 54% of the total wage arrears;
- while regional differences in wages have remained virtually unchanged, sectoral differences have increased, largely as a result of tangible decline in wages in certain sectors and industries (in particular education sector saw a 7% decrease in wages in October as compared to September);
- as in previous years, the ability of households to pay for housing and utility services in full is deteriorating (due to rising costs), and no significant increase in funding for subsidies has taken place yet;
- despite the fact that deposit volume of the banking sector as well as loans to households have increased slightly (by about 1%), their ratio remains almost unchanged, and the households has practically no access to new loans;
- at the same time, the value of loans to households (lending rates) remains high (the weighted average interest rate on new loans increased from 28.8% to 29.0%), although the deposit rate has not changed and remains low (the weighted average interest rate on new deposits equals 6.6%);
- in conditions of declining population, unemployment-to-job vacancies ratio remains virtually unchanged, which is likely to indicate the lack of increase in labour supply.
Let us remind that the proposed Index of Current Economic Capacity for Ukraine (Index) covers not only the traditionally considered purchasing power of the population, but also economic stability — the ability of an "average" household to survive in the case when current income sources are lost for a certain period of time. It is the economic sustainability that is one of the most important conditions to have a sense of security in life and confidence in future — hence, the ability to build long-term life strategies, including strategies for economic behavior, and a general condition for positive social (and psychological) well-being.
The increase in the Index value, which occurred in the first three quarters of 2017 (as compared to the corresponding periods of 2016) is mainly due to the strengthening of macroeconomic stabilisation processes, which involve such factors as ensuring the stability of national currency (hryvnia), a marked increase in the average nominal and real wages (including by doubling the minimum wage), improving the employment situation. However, weak economic dynamics, indebtedness, and no access to credits do not allow to maintain a stable positive dynamics for the economic capacity of the population.
Taking into account the expected worsening of the economic situation in autumn–winter (in particular, growing currency devaluation and inflation, increasing costs for housing and utility services, reduction in seasonal employment), the Index of Current Economic Capacity (that fell to 93 units in November 2017) should be expected to further decline in the first two months of 2018.
