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. Last Updated: 07/27/2016

Kuchma: Ukraine Stands on Verge of Stagnation

APOpposition lawmakers returning Kuchma's speech as he delivers his annual address.
KIEV -- President Leonid Kuchma said on Tuesday that Ukraine's export-dependent economy risked sliding into stagnation if the government and parliament failed to speed up economic change and introduce tax reform.

Kuchma's warnings, in his annual address to parliament, amounted to a rude reminder to ministers who have been trumpeting first-quarter economic successes, painting rosy forecasts of 4 percent growth over the year.

Ukraine, which has had 10 governments since Kuchma came to power in 1994, has a reputation as one of the most difficult East European countries in which to do business. Entrepreneurs complain of red tape, corruption and unclear legislation.

Matters are further clouded by political isolation, with Kuchma facing pressure from an opposition accusing him of corruption and involvement in the murder of a reporter.

"We cannot close our eyes to the fact that factors that drove economic growth in 2000-02 are nearly exhausted," Kuchma said in his text, presented to deputies in written form.

"We run the danger of losing the achievements of economic recovery of recent years and of seeing new crises grip the Ukrainian economy. The economy could slip into stagnation."

He expressed exasperation at the country's repeated failure to overhaul tax legislation. "Tax pressure is driving businessmen into the shadows," Kuchma said. "How many times do I have to plead with parliament and the government to end this country's tax absurdities?"

Many members of parliament, where Kuchma has long failed to secure a reliable majority, greeted the document with cries of "Shame!" Some dumped copies on the speaker's rostrum.

Although official figures show gross domestic product growth nearly doubling to 7 percent year on year in January-March, economists say future growth was under threat.

They say the effect of strong exports could be offset by a bad harvest, slow reforms and world market uncertainty.

The economy has staged a slow recovery over three years, mainly due to favorable market conditions for key exports -- steel and chemicals. Exports account for 60 percent of GDP.

Kuchma said growth was threatened by a weak domestic market, lack of investment and bad export forecasts.

He repeated his stand that Ukraine needed growth of at least 6 percent to close the gap with more developed neighbors in Central Europe.

Since the start of the year, consumer prices have risen more quickly than forecast, standing at 3.7 percent in the first quarter compared with a 1.1 percent fall in 2002.

Kuchma, due to step down before elections next year, repeated an offer to stage a public discussion on redistributing some of his powers to parliament.