PUBLIC DEBT AS A DETERMINANT OF INVESTMENT ACTIVITY AND ECONOMIC GROWTH IN UKRAINE

The scientific article highlights the important issue of the impact of public debt on the structure and functioning of Ukraine’s capital markets and overall economic growth. The aim of the article is to substantiate the negative impact of excessive government debt activity in the capital markets and to provide a quantitative identification of the crowding-out effect as one of the negative consequences of the country’s public debt on the economy. It systematizes the views of leading global scholars on the size of a country’s public debt in the context of ensuring economic growth. The existence of a relationship between the accumulation and size of public debt and economic growth, specifically the country’s GDP, is substantiated. However, the article emphasizes that this is not the only factor determining economic growth in the country. Given the faster pace of government debt accumulation compared to GDP growth, a decrease in investment activity – particularly in bank lending – is observed. This trend is further exacerbated by the crowding-out effect, as excessive government debt activity displaces private entities, worsening overall economic dynamics. The economic consequences of the crowding-out effect for the banking system are analyzed, particularly the decrease in the share of loans in bank portfolios and the increase in the proportion of government bonds. The results of econometric modeling of the impact of public debt, bank lending, and the debt-to-GDP ratio on Ukraine’s nominal GDP are presented. It is established that an increase in the debt-to-GDP ratio has a significant negative impact on economic development, while bank lending turned out to be an insignificant growth factor, which is interpreted as a consequence of the presence of the mentioned effect in the market. Considering the specifics of the Ukrainian economy during the period of martial law, the study proposes a relevant approach to assessing the debt burden, emphasizing the need to optimize public debt policies.