Economic Overview

The world crisis has had an enormous impact on the economic situation in Ukraine.

The recession in developed economies has been accompanied by a deterioration in investment supply and a decline in construction volumes. This, in turn, caused prices for metal products and machinery to collapse. All of this had an adverse effect on export-oriented industries and industries directly or indirectly tied to exports. Since Ukraine is highly oriented towards commodity exports, whose share of GDP is more than 47%, the country saw a dramatic drop in export volumes and revenues at the end of 2008.

The export-oriented steel and chemical industries reported declines of 10.6% and 6.2% by the end of 2008. Their weak performance was largely due to the negative situation on world commodity markets and falling demand for construction and machinery at home.

A series of external and internal shocks caused Ukraine’s industrial output to decline 3.1% in 2008, compared to an impressive performance in 2007 that resulted in 10.2% growth.

The extraction of minerals other than fossil fuels dropped by 6.1% over 2007 levels. Ukraine’s mining industry posted a decline of 2.4%.

Poor performance in the farm sector caused food production to slow down as well by the end of the year. Still, strong consumer demand kept the decline in food-processing to only 0.9%, compared to 2007.

The machine-building industry performed relatively well in the first half of 2008, with output expanding 8.6 % in 2008.

In 2008, retail turnover outpaced 2007 by 18.6%, but wholesale turnover fell by 6.0%. At the end of the year, construction industry was running into trouble.

In 2008, the construction of new buildings grew by 2.1 %, while domestic transport companies carried 4.5% more passengers and 0.2% less cargo than in 2007.