The Nobel laureate told how to heal the economy of Ukraine

Нобелевский лауреат рассказал, как исцелить экономику Украины

Paul Krugman

Paul Krugman advises to fight corruption and carry out reforms.

Nobel laureate in Economics Paul Krugman studied the economy of Ukraine and gave advice on its optimization. This is stated in the magazine New times, reports UNIAN.

“We need to reform, and it will affect the fate of small and medium-sized companies. Fight against corruption, install the rule of law, clear financial system and small businesses will begin to flourish. But I say: reforms need to do for a small business, but for the whole country,” he said.

Krugman is sure that Ukraine is an economy based on the export of raw materials.

“And this is not a very attractive environment for small companies. To change this, you need to put a lot of effort, though conditions now have you good,” he said.

“The hryvnia has depreciated greatly in recent years, but still it is strong enough considering how you have low productivity. The fact is that Ukraine is exporting raw materials to foreign markets and wages — remains low. Incidentally, this is also a problem,” says Krugman.

The expert is sure that Ukraine’s economy should be open and fair.

“The world’s a lot of money with nowhere to invest. With zero real interest rates on bonds of developed countries to take on debt is the right. Investors can be persuaded to invest in bonds of developing countries. Besides, Ukraine today needs a successful precedent of placing of Eurobonds to once again become the focus of attention of investment funds”, – said the Nobel laureate.

He also told how to get large companies to pay taxes in the countries where they actually occur, the business processes.

“This can be done in two ways. First, taxes should be collected in the country where the products are implemented in a particular company, and not where is the main office or a formally registered legal entity of the company. This approach is not ideal, but could solve the problem. Second, if the key economic powers will agree to put offshore in place — they just disappear”, – the expert recommends.

Krugman insists that if the big players in the economy will agree among themselves to close tax havens, it will be quite difficult.

“Finally, I will say that many governments simply do not know how to collect taxes,” he added.

We will remind, the international monetary Fund predicts real GDP growth of Ukraine in 2017 by 2% with consumer inflation at year end in the amount of 10%.