CREDIT EXPANSION AND ITS INFLUENCE ON UKRAINE’S ECONOMY

Abstract

The credit expansion is the quantitative process of expansion of the scales of crediting and the money mass in the turnover. In Ukraine, the reason for its appearance and development is the establishment of the zero rate of compulsory reservation by hryvna deposits by the NBU at the end of 2008. This meant the granting of unbounded potential possibility for the crediting to banks (the introduction of a normative money multiplier with the sign of infinity), which is always associated with the loss of their liquidity and even with the bankruptcy, especially if they chase the profit. While studying the peculiarities of the credit expansion in Ukraine, we cannot but note that the rate of growth of the crediting volumes in foreign currency exceeded considerably that of the total mass of loans given by banks. This meant the parallel development of the currency credit expansion in Ukraine, together with the credit expansion in hryvna, which favored the appearance of the currency credit boom in 2008 and especially in 2014. Since Ukraine’s real GDP does not attain its initial level at the time of the withdrawal from the USSR (the business cycle is not completed), the excessive volumes of crediting at the low growth of volumes of the real GDP assist increasing the inflation more than 24 mln percents for the independence years. This favored the arising of negative interest rates and rendered (together with the credit expansion) the serious influence on the level of losses unprecedented for the domestic banks (53 bln hrv) in 2014.
In our opinion, выходом из the current situation can be changed by the development of a scientifically substantiated monetary policy by the NBU and the reanimation of a real production, which requires the material interests of domestic commodity producers. Under such conditions, it will be expedient to consider the question about the credit expansion as that about the proper management of it, namely, about its use for the development and the enhancement of the efficiency of a real production, as well as the socio-economic rise of the country without disproportions and the sharpening of contradictions.