Economy of Ukraine
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| Economy of Ukraine | ||
|---|---|---|
| Currency | 1 Hryvnia (UAH) = 100 kopiykas | |
| NBU official exchange rate | 5.05 UAH for 1 USD (as of January 2007) | |
| Non-official retail exchange rate | 5.10-5.15 UAH for 1 USD (as of April 2006) | |
| Fiscal year | Calendar year | |
| Trade organisations | CIS and GUAM | |
| Statistics | ||
| GDP (PPP) Ranking | 31st (2006 est.) [1] | |
| GDP (PPP) | $355.8 billion (2006 est.) | |
| GDP growth rate | 6% (2006 est.) | |
| GDP per capita (PPP) | $7,600 (2006 est.) | |
| GDP by sector | agriculture (17.5%), industry (42.7%), services (39.8%) (2006 est.) | |
| Inflation rate | 8.5% (2006 est.) | |
| Pop below poverty line | 26.7% (2006 est.) | |
| Labour force | 21.69 million (2006 est.) | |
| Labour force by occupation | agriculture 24%, industry 32%, services 44% (1996) | |
| Unemployment rate | 6% (2006 est.) | |
| Main Industries | coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing (especially sugar) | |
| Trading partners | ||
| Exports | $39.12 billion (2006 est.) | |
| Main partners (2005) | Russia 22.1%, Turkey 6%, Italy 5.6% | |
| Exports Commodities | ferrous metals and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, food products | |
| Imports | $44.81 billion (2006 est.) | |
| Main partners (2005) | Russia 35.5%, Germany 9.4%, Turkmenistan 7.4%, China 5% | |
| Imports Commodities | energy, machinery and equipment, chemicals | |
| Public Finances | ||
| Public Debt | 17.3% of GDP (2006 est.) | |
| External Debt | $41.57 billion (30 June 2006 est.) | |
| Revenues | $33.41 billion | |
| Expenses | $35.6 billion; note - this is the consolidated budget (2006 est.) | |
| Economic Aid - Recipient | $637.7 million (1995); IMF Extended Funds Facility $2.2 billion (1998) | |
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The economy of Ukraine is an emerging free market, with a gross domestic product that has experienced double-digit growth in recent years. Formerly a major component of the economy of the Soviet Union (both in industry and agriculture), Ukraine's economy experienced major fluctuations during the 1990s, including hyperinflation and drastic falls in economic output; GDP growth was first registered in 2000, and reforms are continuing.
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[edit] Overview
Ukraine has many of the components of a major European economy - rich farmlands, a well-developed industrial base, highly trained labour, and a good education system. At present, however, the economy remains in poor condition. While Ukraine registered positive economic growth starting from 2000, this came on the heels of eight straight years of sharp economic decline. As a result, the standards of living for most citizens has declined more than 50% since the early 1990s, leading to a relatively high poverty rates. The macroeconomy is stable, with the hyperinflation of earlier in the decade having been tamed. Ukraine's currency, the hryvnia, was introduced in September 1996, and has remained fairly stable. The economy started growing in 2000, and growth has continued. GDP in 2000 showed strong export-based growth of 6% - the first growth since independence - and industrial production grew 12.9%. The economy continued to expand in 2001 as real GDP rose 9% and industrial output grew by over 14%. Growth of 4.6% in 2002 was more moderate, in part a reflection of faltering growth in the developed world. In general, growth has been undergirded by strong domestic demand, low inflation, and solid consumer and investor confidence. Growth was a sturdy 9.3% in 2003 and a remarkable 12% in 2004, despite a loss of momentum in needed economic reforms.
Ukraine is relatively rich in natural resources, particularly mineral deposits. Although oil reserves in the country are largely exhausted, it has other important energy sources, such as coal, natural gas, hydroelectricity and nuclear fuel raw materials.
Ukraine has a major ferrous metal industry, producing cast iron, steel and pipes. As of 2005, Ukraine was the world's seventh largest steel producer. Another important branch is country's chemical industry producing coke, mineral fertilizers and sulfuric acid. Manufactured goods include metallurgical equipment, diesel locomotives, tractors, automobiles, The country possesses a massive high-tech industrial base, including much of the former USSR's electronics, arms industry and space program. However, these fields are state-owned and underdeveloped in terms of business management.
Ukraine is a major producer of grain, sugar, meat and milk products.
Ukraine encourages foreign trade and investment. The parliament has approved a foreign investment law allowing Westerners to purchase businesses and property, to repatriate revenue and profits, and to receive compensation if the property is nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and corruption all continue to stymie large-scale foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for shareholders' rights severely restricts portfolio investment activities. Total foreign direct investment in Ukraine is approximately $17.4 billion (17.4 G$) as of April 2006, which, at $371 per capita. Much reform is still needed, in order to stabilise the investment climate.
Most of Ukrainian trade is conducted with Russia and the European Union. An overcrowded world steel market threatens prospects for Ukraine's principal exports of non-agricultural goods such as ferrous metals and other steel products. Although exports of machinery and machine tools are on the rise, it is not clear if the rate of increase is large enough to make up for probable declines in steel exports, which today account for 46% of the country's overall exports.
Ukraine imports 90% of its oil and most of its natural gas. Russia ranks as Ukraine's principal supplier of oil, and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports come from Russia - which delivers its own gas, as well as the gas from Turkmenistan. Instead, Ukraine is transporting Russian gas to EU through its well-developed gas pipelines system, being the Europe's vitally important gas transiter. Country's dependence on Russian gas supplies dramatically affects its economics and foreign policy, especially after the recent major gas dispute.
However, Ukraine is independent in its electricity supply, moreover, exporting it to both Russia and Eastern Europe. This is achieved through a wide use of atomic energy and hydroelectricity. The recent energy strategy intends gradual decreasing of gas- and oil-based generation in favor of nuclear power, as well as energy saving measures, shortening of industrial gas consuming. Reform of the still inefficient and opaque energy sector is a major objective of the International Monetary Fund (IMF) and World Bank programs with Ukraine.
The IMF approved a $2.2 billion Extended Fund Facility (EFF) with Ukraine in September 1998. In July 1999, the 3-year program was increased to $2.6 billion. Ukraine's failure to meet monetary targets and/or structural reform commitments caused the EFF to either be suspended or disbursements delayed on several occasions. The last EFF disbursement was made in September 2001. Ukraine met most monetary targets for the EFF disbursement due in early 2002; however, the tranche was not disbursed due to the accumulation of a large amount of VAT refund arrears to Ukrainian exporters which amounted to a hidden budget deficit. The EFF expired in September 2002, and the Ukrainian Government and IMF began discussions in October 2002 on the possibility and form of future programs.
In 1992, Ukraine became a member of the IMF and the World Bank. It is a member of the European Bank for Reconstruction and Development but not a member of the General Agreement on Tariffs and Trade/World Trade Organization. While Ukraine applied for WTO membership, its accession process was stalled for several years. In 2001, the government took steps to reinvigorate the process; however, there was less concrete progress in 2002. The WTO Working Party on Ukraine met in June 2002. The government's stated goal is to accede to the WTO by the end of 2006- February 2007. Currently, the only country yet blocking Ukraine's entry to the WTO is Kyrgyzstan.
A political crisis in the middle of 2006 was feared as a threat to economic and investment stability, however, despite the forecasts, the political situation has not scared the investors. The GDP has shown a good growth rate of 9% in July 2006, compared to July 2005. Industrial output has increased. Car sales soared, while the banking sector has expanded, thanks to the arrival of European banks.
[edit] Macro-economic trend
This is a chart of trend of gross domestic product of Ukraine at market prices estimated by the International Monetary Fund with figures in millions of Ukrainian Hryvnias.
| Year | Gross Domestic Product | US Dollar Exchange |
|---|---|---|
| 1995 | 54,516 | 1.47 Hryvnias |
| 2000 | 170,070 | 5.44 Hryvnias |
| 2005 | 418,529 | 5.12 Hryvnias |
[edit] Environmental Issues
Ukraine is interested in cooperating on regional environmental issues. Conservation of natural resources is a stated high priority, although implementation suffers from a lack of financial resources. Ukraine established its first nature preserve, Askanyia-Nova, in 1921 and has programs to breed endangered species.
The country has significant environmental problems, especially those resulting from the Chernobyl nuclear power plant disaster in 1986 and from industrial pollution. In accordance with its previously announced plans, Ukraine permanently closed the Chernobyl Atomic Energy Station in December of 2000. In November of 2001, Ukraine withdrew an application it had made to the EBRD for funding to complete two new reactor units to compensate for the energy once produced by Chernobyl. Ukrainian concern over reform conditions attached to the loan - particularly tariff increases needed to ensure loan repayment--led the Ukrainian government to withdraw the application on the day the EBRD Board was to have considered final approval. Work on the so-called "object shelter" to permanently entomb the reactor where the world's worst nuclear accident occurred has been slower than anticipated but continues. Design work as well as structural improvements to the "sarcophagus" erected by the Soviet Union are largely complete, and construction on the new shelter is scheduled to begin in 2004.
Ukraine also has established a Ministry of Environment and has introduced a pollution fee system that levies taxes on air and water emissions and solid waste disposal. The resulting revenues are channelled to environmental protection activities, but enforcement of this pollution fee system is lax.
[edit] Miscellaneous data
Household income or consumption by percentage share:
- lowest 10%: 3.4%
- highest 10%: 24.8% (2005)
Industrial production growth rate: 3% (2005 est.)
Electricity:
- production: 181.3 TWh (2004)
- consumption: 176 TWh (2004)
- export: 1 TWh (2004)
- import: 0.255 TWh (2004)
Electricity - production by source:
- fossil fuel: 48.6%
- hydro: 7.9%
- nuclear: 43.5%
- other: 0% (2001)
Oil:
- production: 85,660 barrel/day (2004)
- consumption: 491,700 barrel/day (2004)
- exports: NA
- imports: NA
- proved reserves: 395 million barrel (9 November 2004)
Natural gas:
- production: 20.3 billion m³ (2004)
- consumption: 75.8 billion m³ (2004)
- exports: 3.9 billion m³ (2004)
- imports: 59.8 billion m³ (2004)
- proved reserves: 1.121 trillion m³ (9 November 2004)
Agriculture - products: grain, sugar beets, sunflower seeds, vegetables; beef, milk
Exchange rates: hryvnia per US$1 - 5.13 (2005), 5.33 (May 2004), 5.30 (October 2002), 5.59 (February 2000), 5.3811 (January 2000), 4.1304 (1999), 2.4495 (1998), 1.8617 (1997), 1.8295 (1996), 1.4731 (1995)
Average Salary per regions
- Further information: List of Ukrainian oblasts and territories by salary
[edit] See also
