Assessment of trends in the city's economic development in 2003
A characteristic feature of the present is the creation of conditions for dynamic and balanced socio-economic development of the city, raising the standard of living of the population, and democratizing all components of public life.The city should be viewed as a territory that constantly generates its own economic development, relying on the characteristics and needs of the local economy. To this end, directions for the city's development are determined, and its economic policy is developed, aimed at improving business, investment opportunities, and employment for the current generation and future generations.
Developing a strategy for the city's economic development is an extremely pressing issue, since only on its basis can local self-government bodies focus their attention not only on solving current problems but also determine the long-term prospects for the life of the territorial community.
Analyzing the state of the city's economy, one can note a trend toward stabilization of economic processes in the city's economic complex.
Incomes of the population and their main component—wages—grew, and it was also possible to keep prices at a moderate level. Long-term structural factors such as privatization and restructuring, and the improvement of public finances, created a favorable environment for economic growth.
The city's industry has achieved a stable pace of growth in industrial production. Industrial enterprises of the city produced goods (in current prices) worth UAH 819.8 million in 2003, or 42.4% of regional output. Production volumes increased by 19.2% over the year. Economic growth continues against the backdrop of fairly moderate inflation—108.2 percent. The city's industry employs 15 thousand people. The average wage is UAH 512.
Investment policy also had a positive impact on accelerating economic growth rates—for years in a row, investments in fixed capital have been growing at rates that significantly outstrip the growth rates of industrial production volumes.
Investments in fixed capital increased by 43.5% and amounted to UAH 148.5 million. UAH 165.3 million of capital investments were invested in the city's economy, or one third of the total regional volume.
Investments in fixed capital predominate in their composition (89.8%), while the share of expenditures on improving facilities (major repairs, modernization, modification) is 6.9%. The acquisition and creation of other non-current tangible assets accounts for 1.9%. Intangible assets received 1.4% of the total volume of capital investments.
The volume of foreign investments is growing annually.
In 2003, foreign investors invested USD 75.8 million in the city's economy, which is almost 8 times more than in the corresponding period last year, of which 98.5% came in monetary form. All investments came from European countries. Non-residents withdrew capital amounting to USD 39.3 thousand.
A balanced budget policy made it possible to fully implement the revenue and expenditure parts of the state budget for 2003. The consolidated budget for revenues was implemented in the amount of UAH 129.4 million, which is 25.0 percent more compared with the corresponding period last year.
All this is real evidence of the economy's gradual movement onto a trajectory of sustainable growth.
Despite the stability of economic processes in the city's economic complex, the executive committee of the city council sees risks and negative trends that weaken the effectiveness of factors for further economic growth. These trends are caused by systemic outdated problems that, unfortunately, are far from being resolved, and the vast majority of them lie in the area of a weakly reformed governance system, insufficient protection of property rights, contract and corporate law, restraint of structural transformations, and reduced competitiveness.
Long-term economic growth requires constant attention to establishing an effective owner, reducing the economic role of the state, and introducing the latest management technologies in the city's economic complex. Management principles are characterized by ineffective relationships between enterprises. Thus, in 2003, 160 enterprises operated at a loss, compared with 610 in 2002. Losses from ordinary activities before taxation amounted to UAH 43.1 million.
The contribution of small and medium-sized businesses to the city's economy remains at a rather insignificant level.
A significant debt of UAH 26.6 million remains for utility services consumed by the city's population.
There is a trend toward a decrease in wage arrears. Currently, the amount of debt is UAH 4.0 million. In addition, the debt of enterprises that have suspended operations amounts to UAH 3.0 million (OJSC "Volteks" UAH 1.9 million).
The shortage of budget funds is most clearly evident in the practically unreformed budget-funded sectors of the economy - education, healthcare, etc.
The executive committee of the city council is aware that a new model for Ukraine's entry into the global space requires profound qualitative transformations, the definition of clearly outlined tasks for accelerating the economy's movement onto a trajectory of sustainable growth by strengthening the state's capacity and deepening market reforms, and the establishment of a socially oriented structural and innovation model of development.