Economy
Ukraine has considerable economic, industrial and agricultural potential, possessing as it does considerable experience in steelmaking, mining, power generation, and chemical production. With annual grain harvests of more than 35 million tonnes a year, Ukraine is still worthy of the name “the bread basket of Europe.”
At the same time, Ukraine inherited a dysfunctional economic system and outdated manufacturing base from the Soviet Union. Today, Ukraine is going through a tough transition period. Reforms in the structure of its industries are greatly needed, but are being enacted either too slowly or not at all. Some industries do not have a closed production cycle and those that do are insufficient in number. The legal system is also flawed.
These problems are what hinder growth in the private sector. Ukraine’s economy simply does not offer the necessary conditions for the successful development of small-sized and medium business and so investment is slow to come.
Like most post-communist economies, Ukraine’s GDP dropped 52% when the Soviet Union collapsed. Industrial output shrank 48% and farm production fell 51%. Unemployment became a major problem. According to the ILO, the unemployment rate was 8.1% in 2010, while Derzhkomstat, the state statistics committee, reported that the official unemployment rate was 2% in December 2010. But it is difficult to figure out the exact number though, when you factor in people who work short workdays, have days off and leave without pay, but also illegally employed people who collect unemployment benefits.
Today Ukraine has a grey economy, which some experts estimate amounts to half of the country’s GDP. This grey market employs about 11 million in Ukraine. This has also led to a major socio-economic gap, with 10% of the population earns 40% of all the revenues. Poverty is on the rise. According to opinion polls, the share of the population living below the poverty line grew from 14.8% in January 2010 to 18.3% in February 2011. According to UN data, 25% of Ukrainians are now living below the poverty line.
In 2000, Ukraine’s economy began to turn around as farm and administrative reforms kicked in and large-scale privatization picked up steam. According to government statistics, domestic industrial and agricultural markets have been growing ever since. These statistics also show that personal incomes have been growing as well. In the spring of 2002, the average monthly salary was UAH 400. In 2008 it was UAH 1 806 and in 2011 it reached UAH 2 297. The food and consumer industries have been growing rapidly. Heavy-duty and super heavy aircraft called Ruslan and Mria were built by the Antonov Plant and became Ukraine’s most competitive product on the world market. Today, the development of hi-tech industries is a major priority.
In August 2008, Ukraine’s economy entered a steep downturn, with GDP plunging more than 30% in some industries. The situation in the country’s economy over 2008-2010 revealed serious problems that cannot be solved without major structural reforms across all sectors.
Key economic indicators for 2006-2010
| ¹ | Indicator | 2006-2007 | 2007-2008
| 2008-2009
| 2009-2010 | | 1 | Industrial Production Index, % (Jan–Oct) | 108.0 | 100.0 | 73.6 | 111.1 | | 2 | Increase/decline in retail turnover, real %
(Jan–Oct to Jan–Oct of previous year) | 128.6 | 123.1 | 79.1 | 105.8 | | 3 | Producer Price Index for industrial
products, % (Jan–Oct) | 119.1 | 137.8 | 105.1 | 121.3 | 4
| Consumer Price Index, % (Jan–Oct) | 101.9 | 114.6 | 116.5 | 109.4 | | 5 | Investment in fixed assets, % (Jan–Sept) | 128.5 | 104.7 | 56.3 | 97.1 | | 6 | Investment in fixed assets, % of GDP
(Jan–Dec) | 26.4
(2007)
| 24.5
(2008)
| 16.6
(2009)
| - | 7
| Official unemployment rate, % of working
age population | 2.3
(at Jun 1,
2007)
| 1.9
(at Jun 1,
2008) | 2.4
(at Jun 1,
2009) | 1.4
(at Jun 1,
2010) |
Source: Derzhkomstat
Meanwhile, the economy is also showing signs of a gradual recovery. In addition to the resumption of economic growth, the Government initiated a number of ambitious reforms in December 2010. Tax reform, including the adoption of a new Tax Code, is underway. Pension reform to introduce a three-tier pension system has just been adopted. A number of pilot projects aimed at boosting medical, education and residential services reforms are being launched. Another priority is land reform, which should grant farmers the right to sell and buy arable land. The successful implementation of reforms is the key expectation among both Ukrainian businesses and international investors.
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Ukraine
