Destructive changes in the distribution of gross disposable income and the guidelines of the state policy to overcome them

I. Kryuchkova

Economy and Forecasting, 2013, issue 1, 7-26

Abstract: The author highlights the reasons and consequences of the destructive changes in the distribution of gross disposable income (GDI) between the institutional sectors of the economy in 2012. First of all, it is the high level of net outflow of property incomes from the real sector in favor of the financial corporations due to the high cost of crediting with the effect of decline of the enterprises' savings causing a decrease in investments in the current year. Secondly, it is the GDP drop in the sector of general state management due to the big difference between the received and paid social transfers with an impact on the accumulation of the national debt. The author emphasizes that a special decline took place in the incomes of the non-financial corporations, which led to an economically dangerous infringement of the basic conditions of GDP reproduction against a background of increased outflow of factor incomes, as well as savings of the financial sector (in the form of debt repayment). The article provides recommendations on the elaboration of a medium-term program of sanitation of the public finances (including measures on "deshadowzation" of the economy and diversification of pension sources together with taking harsh measures concerning not only the volumes of budget deficit, but also the volumes and structure of public expenditures, especially as regards the social transfers for the whole period (up to 5and more years). At the same time, in order to reduce the outflow of property incomes and resumption of the safe saving level of the non-financial corporations, the author recommends introduction of the legal limitation of the interest rates on deposits and credits with the NBU control over and establishment of correcting coefficients on the banks' contributions to the Fund for Guaranteeing Personal Persons' Deposits depending on interest rates on deposits.

Date: 2013
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