CHAPTER FROM MICROECONOMIC FUNDAMENTALS TO MACROECONOMIC OUTCOMES 1 Ukraine Has Substantial Scope to Boost Productivity through increased Competition and Market-Oriented Reform Ukraine is emerging from a period of slow growth in the wake of the economic crisis that marked the start of the still-unresolved con昀氀ict in the eastern part of the country. The econ- omy has begun to stabilize, with real GDP growing by 2.3 percent in 2016 and 2.5 percent in 2017. 3 However, this follows a cumulative 16 percent contraction in 2014 and 2015. The Ukrainian govern- ment is aware that market-based reforms will be vital to accelerate growth, and the authorities have already taken important steps to increase competition. Nevertheless, much more could be done to reduce the distortive impact of the regulatory framework, especially in network industries and services, and the evenhanded enforcement of competition policy by independent market regulators will be necessary to increase investment and improve outcomes for consumers and businesses. In this context, the following report analyzes market competition in Ukraine, evaluates the e昀케ciency of its regulatory framework, and assesses the extent to which government interventions are conducive to competition. The report’s 昀椀ndings are designed to inform policy solutions that will help unleash the country’s growth potential and create inclusive economic opportunities. Strengthening competition policy will be critical to overcome Ukraine’s decades-long lack of productivity growth and leverage the capacity of an e昀케cient private sector to sustain progress on social development by expanding access to a昀昀ordable, high-quality goods and services. Competition policy encompasses the laws, regulations, processes, and institutions neces- sary to ensure a level competitive playing 昀椀eld and address distortions that could reduce economic 4 welfare. A sound competition policy framework promotes economic growth and shared prosperity both by facilitating productivity growth within 昀椀rms and by enabling the e昀케cient reallocation of 5 resources to more-productive 昀椀rms and sectors. Productivity gains reduce prices and improve the quality of goods and services, bene昀椀tting consumers—including lower-income households. E昀昀ec- tive competition policies must consider the speci昀椀c features of di昀昀erent markets, and well-designed 3 World Bank Group (2018). Macro Poverty Outlook for Europe and Central Asia. Spring Meetings 2018. 4 See Motta, M. (2004). Competition policy: theory and practice. Cambridge University Press. 5 See Syverson, C. (2011). What Determines Productivity? Journal of Economic literature. 5