Ukraine » Introduction

Basic Economic Facts

GDP composition by Sector

Formerly an important industrial and agricultural region of the Soviet Union, Ukraine now depends on Russia for most energy supplies, especially natural gas, although lately it has been trying to diversify its sources. The lack of significant structural reform has made the Ukrainian economy vulnerable to external shocks.

After 1991 the government liberalised most prices and erected a legal framework for privatisation, but widespread resistance to reform within the government soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Loose monetary policies pushed inflation to hyperinflationary levels in late 1993. The current government has pledged to reduce the number of government agencies, streamline the regulatory process, create a legal environment to encourage entrepreneurs, and enact a comprehensive tax overhaul. Reforms in the more politically sensitive areas of structural reform and land privatisation are still lagging.

Outside institutions particularly the IMF have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support. The 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 was under girded by strong domestic demand and growing consumer and investor confidence. Rapid economic growth in 2002 2004 is largely attributed to a surge in steel exports to China.