Ukraine will attract significant capital flows over next decade if recovery continues as planned - Lagarde
Significant capital flows could be attracted by Ukraine over the next decade if recovery continues as planned, but without appropriate guarantees, this capital risks being misallocated, undermining long-term productivity instead of strengthening it, says European Central Bank (ECB) President Christine Lagarde.
She said there are encouraging signs. The EU-Ukraine Association Agreement and the Deep and Comprehensive Free Trade Area have already facilitated significant reforms in the financial sector. Banking regulation in Ukraine now meets more than 75% of EU standards, covering such important areas as capital adequacy, governance and audit, she said at the 9th Annual Research Conference “Economic and Financial Integration in a Stormy and Fragmenting World” in Kyiv on Thursday.
According to Lagarde, this is also facilitated by the introduction by the National Bank of Ukraine (NBU) of a risk-based supervisory model inspired by the Single Supervisory Mechanism, the banking supervision system in Europe.
She noted that despite the extremely difficult circumstances, Ukraine is also modernizing its capital markets – consolidating exchanges, modernizing settlement systems and strengthening regulatory support to attract long-term investors.
She said these reforms are already paying off: in 2023, Ukraine's banking sector remained profitable and well-capitalized, despite the ongoing war - an outcome that would have been unthinkable a decade ago.
Lagarde added that if Ukraine continues its course of institutional reforms and adapts its economy to new opportunities despite the turbulent situation, it can become an important engine of growth and a key factor in the region's future.