Ukraine: Zelensky leaps forward in polls, but the race is far from over in Ukraine's presidential election
March 4, 2019
As the 31 March presidential election draws nearer, Volodymyr Zelensky, a comedian and political novice, has surged ahead in the polls in recent weeks. Zelensky’s rapid ascent has come against the backdrop of turbulent times in Ukraine’s political arena: Anemic growth, ongoing economic and territorial disputes with Russia and, above all else, seemingly never-ending corruption scandals have tarnished many of the country’s traditional political elite. Nevertheless, a second-round runoff for the presidency is extremely likely, with President Petro Poroshenko and populist opposition leader Yulia Tymoshenko trailing closely behind. In the run-up to the vote, the continuity of existing economic reforms has been sharply brought into question given the diverging views among the three leading candidates over how to kickstart the Ukrainian economy after years of turmoil. That being said, all three candidates seem to lack a comprehensive economic program, suggesting appeal over short-term popularity is likely to prevail over long-term planning.
A new face on the political scene but an established one in social media and television, Volodymyr Zelensky is poised to win on his anti-corruption and anti-establishment platform. Furthermore, his openness to dialogue with Moscow has earned him support among the Russian-speaking population. Analysts, however, fret over Zelensky’s inexperience and credentials, which has weighed greatly on his credibility with foreign investors. Therefore, despite his publicly-expressed support for Ukraine’s pro-Western agenda and its cooperation with international lenders, policy continuity—critical to receiving the second tranche of the IMF’s USD 3.9 billion loan—will remain in doubt if Zelensky is successful in his presidential bid.
Meanwhile, Petro Poroshenko, the incumbent, has been promulgating national security and a Ukrainian identity-oriented agenda, highlighting his tough anti-Russia stance. Poroshenko, who is the markets’ favorite due to his unequivocal pro-EU and pro-NATO positions as well as his commitment to Ukraine’s partnership with the IMF, suffered a blow in polls at the end of February when corruption allegations surfaced. The unfolding scandal has rocked the status quo and has helped opposition leader Yulia Tymoshenko make a strong comeback in the polls. While Tymoshenko’s foreign policy appears broadly similar to the two leading candidates, her populist economic message has raised major concerns for lenders. Particularly, Tymoshenko has promised to reverse cuts to gas subsidies, which was a key requirement to originally securing the IMF’s backing, and to boost government spending despite fraught public finances.
Overall, despite Zelensky’s recent leap in the polls, the election outcome remains highly uncertain. This viewpoint is summarized by Oleksandr Pecherytsyn, an economist at Credit Agricole in Ukraine, who noted: “The ratings of the three main candidates are so close to each other and they are changing so quickly […] that it is neither clear who will win the elections out of three likely candidates nor who would participate in the second run.” Elaborating further, Pecherytsyn stated that, irrespective, “current strict monitoring from international donors and the necessity for Ukraine to obtain new loans to cover considerably higher external repayments this year” will limit the new president’s policymaking, or risk losing vital financial support programs, at least in the short term.
Regardless of the outcome, the next president will inherit a half-transformed economy and will face numerous challenges both at home and externally. The economic recovery remains weak amid the ongoing and financially-draining territorial conflict with Russia, deep-rooted corruption and widespread poverty. On one hand, the continuity of current economic policy is likely in the short-term, which bodes well for the country’s relationship with international debtors. In the long-run, however, the implementation of economic reforms geared to raising productivity and investment will be required to lift growth toward potential—something that all three leading candidates appear to be missing in their agenda.
Ukraine Public Debt Forecast
FocusEconomics panellists currently see the health of public finances improving gradually going forward. The consensus is for public debt to GDP ratio to fall to 60.0% this year before moderating further to 58.9% in 2020.
Author: Almanas Stanapedis, Economist