Forecasted trends of the national economic development in the context of the creation of FTA with the EU

L. Shynkaruk, I. Baranovska, O. Gerasimova

Economy and Forecasting, 2013, issue 3, 38-58

Abstract: The article presents a forecast based assessment of the change of output by economic activities due to the conclusion of Association Agreement between Ukraine and EU and the corresponding creation of a free trade area. The assessment has been done in accordance with a methodology based on the use of the dynamic input-output model, with the inclusion of the corresponding substitution elasticities, which makes it possible to assess the possibilities and risks, on the domestic market, for Ukraine's importers and producers in order to timely avoid losses, which may take place due to the accession to the free trade area. The calculations of the effects of the integration were made in accordance with the structure of Ukraine's foreign trade formed after 2010-2011. The equation of intersectoral balance was constructed based on the input-output tables in basic prices of 2010. The elasticity rates of exports and imports were calculated in accordance with the econometric equations obtained on the data of Ukraine's foreign trade in 2006-2011. The authors point out that the liberalization of the trade regime, due to the creation of the free trade area would contribute to increased turnover between Ukraine and the EU Member countries. However, the maximum effect will be observed in the first year of the Agreement's action, when the maximum reduction of the customs tariffs takes place, and in the future, due to the raw materials character of the exports to the EU countries, this effect will disappear. The multiplier effect appearing due to the trade intensification and showing itself in the distribution of incomes obtained from increased exports, will only partly improve the output indicators without changing the general tendency. Taking into account the fact that the positive influence of the trade effects will be short, the authors justify the need of developing and introducing effective measures for individual economic sectors aimed at overcoming the disproportions of their technological structure, whose aggravation could lead to further losses on the domestic and foreign markets.

Date: 2013
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