February 3, 2012 Ukraine Enhances Efforts to Diversify Its Energy Sector February 2, 2012 Experience Winter Wonderland in Kyiv


	- Economic History Note - Economic Overview - National Economic Indicators - Industry - Agriculture - Services - Consumer Market



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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. However Ukraine’s economy is rapidly recovering.

Over January–April 2011, crude steel output in Ukraine rose 5.8% over the same period of 2010, up to 11.631 million tonnes. Deteriorating sales volumes finally forced Ukraine’s steel industry to lower its ex-works prices. The differential between domestic and export figures has narrowed, but it remains a controversial issue for end-users.

Ukraine’s industry is on the upswing, growing 8.7% year-on-year in the first half of 2011. The mining industry saw 5.7% growth during the same period, while the power, gas and water industry rose 7.0%, and manufacturing 9.9%.

Over January-May 2011, machine-building enterprises saw sales rise by 41.6%, to UAH 47.578bn, compared to the same period of the previous year. The share of the machine-building sector in total volume of products sold by the domestic machine-building industry amounted to 10.9%. In 2010, Ukraine’s machine-building enterprises increased product sales by 37.8%, tî UAH 101.819bn.

The volume of retail turnover in Ukraine grew by 2.1%, while domestic transport companies carried 4.5% more passengers and 0.2% less cargo than in 2007, 11.9% y-o-y in 2M11 in comparable prices, to UAH 42.9bn or US $5.41bn.

After the economic hardship of 2008, 2009 was even more challenging for the residential sector. There were 40% fewer housing starts: only 6.4mn sq m in total were built as construction ground to a halt for lack of financing. Only some of the projects launched before the crisis were continued and virtually no new investments were made. The average size of housing completed was 96.1 sq m, with the average for cities 90 sq m and the average for rural areas 133.4 sq m. In 2010, over 17% more housing space was completed than in 2009.

As of May 2010, Ukraine was the third largest borrower from the IMF, following Hungary at $11.6bn and Romania at $12.5bn. The IMF granted Ukraine a $16.4bn loan in October 2008, of which the government has so far received $10.6bn. Payments were suspended in late 2009, after Ukraine raised minimum wages and pensions, contrary to IMF recommendations.

On July 28, 2010, the IMF approved a 29-month $15.15bn loan to Ukraine. Among others, this was followed by a 50% increase in residential natural gas rates in July 2010, in accordance with a key IMF requirement in exchange for the loan.