Impact of aggregate expenditures on the volume of national production

Abstract

Ukrainian economy, which is recovering after the severe crisis in 2009, has shown obvious signs of macroeconomic instability over the last five years, namely the slowdown of economic growth in 2012-2013 and the recession during the 2014-2015 period. One of the main reasons for this is the irrational structure of national consumption. The present study allows finding out that the biggest defects of the structure of the aggregate expenditures of the Ukrainian economy are the reduction in the share of gross capital formation and an increase in the share of net export with minus. The main factors hampering private capital formation in Ukraine are the reduction of national savings and excessive market concentration. Rapid inflation rates and an extremely low level of confidence in financial intermediaries from the part of Ukrainian households to buy foreign currencies, which they save as non-performing assets (cash). This is an extraction of resources from the «profits-expenditures» flow, which do not work for the economy and are extremely scarce. The chronic negative net export of Ukraine is connected with unsatisfactory terms of trade, because high-tech science-intensive products and excessive amounts of hydrocarbons are imported, and the products with a low level of processing are mainly exported. This is explained by the insufficient tempo of technological modernisation of the Ukrainian economy and innovation lag: 40% of workers employed in the industry are engaged in the production at the low technological level, about 20% - at the average level and only 2.5% - at the high level. The increase of GDP due to the introduction of new technologies in Ukraine is estimated at 0.7-1%, while in developed countries it reaches 60% and more. Comparison of Ukraine with other European countries in terms of aggregate expenditures structure in 2012-2017 substantiated the need for deep structural change in the country.