Analysis of Factors Influencing Foreign Direct Investment in Ukraine

Abstract

In today's world, FDI plays an important role for developing economies, as it not only transfers technology and capital, but also determines the dynamics and depth of economic growth and shows the speed of the process of transformation of the economic ecosystem at the national and global levels. Despite the above advantages, the inflow of FDI into Ukraine is not as great as in other countries of the region. The purpose of this article is to analyze the factors influencing foreign direct investment in Ukraine. In this article, based on foreign experience, economic, institutional and other factors influencing FDI were analyzed. Also, the dependence of the inflow of foreign direct investment in the context of Ukraine was assessed, and the prospects and forecast of future investment income were described. The results of the analysis carried out during the writing of this article made it possible to determine the factors that affect the inflow of FDI into the country's economy in order to assess their impact in the context of Ukraine. These include: market size measured by GDP, exchange rate, average wage, indicators of human potential, ease of doing business, level of corruption, tax burden, rule of law index, as well as the impact of regional trade agreements, in particular the free trade zone between Ukraine and EU, established in 2016. Some factors influencing the inflow of FDI to Ukraine over the past 10 years were graphically analyzed, which allowed systematizing a large volume of researched data and became the basis for further analysis of Ukraine's investment situation. After that, regression equations were constructed for each of the influence factors and coefficients of determination were determined. Thus, it can be concluded that in the context of Ukraine, the following factors were statistically significant: institutional indicators, nominal GDP, which measured market potential, the exchange rate of the US dollar, as well as the regional trade agreement factor, which was measured by the volume of trade between Ukraine and the EU. While others show no significant effect or are not supported by the relevant theory. At the end of the article, forecasts of future FDI inflows to Ukraine after the end of the war were formed and described. Regarding recommendations for further research on this topic, it would be useful to analyze the influence of corruption indicators on the inflow of foreign direct investment to Ukraine, as well as the influence of human development of Ukrainians on the attractiveness of investments in the state, as well as to conduct a study of how important labor costs are strength in attracting FDI to Ukraine.