Ukraine: Economy Overview

11 February 2010
by Ina Dimireva -- last modified 11 February 2010

Ukraine reached an agreement with the IMF for a $16.5 billion standby arrangement in November 2008 to deal with the economic crisis. However, political turmoil in Ukraine as well as deteriorating external conditions are likely to hamper efforts for economic recovery.

Economy Overview

After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Shortly after independence was ratified in December 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirements. Ukraine concluded a deal with Russia in January 2006 that almost doubled the price Ukraine pays for Russian gas. Disputes with Russia over pricing have led to periodic gas cut-offs. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms. Ukrainian Government officials eliminated most tax and customs privileges in a March 2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but more improvements are needed, including fighting corruption, developing capital markets, and improving the legislative framework. Ukraine's economy was buoyant despite political turmoil between the prime minister and president until mid-2008. Real GDP growth exceeded 7% in 2006-07, fueled by high global prices for steel - Ukraine's top export - and by strong domestic consumption, spurred by rising pensions and wages. The drop in steel prices and Ukraine's exposure to the global financial crisis due to aggressive foreign borrowing lowered growth in 2008 and the economy contracted more than 14% in 2009, among the worst economic performance in the world.

GDP (purchasing power parity):

$294.3 billion (2009 est.)
country comparison to the world: 40
$342.7 billion (2008 est.)
$335.6 billion (2007 est.)
note: data are in 2009 US dollars

GDP (official exchange rate):

$115.7 billion (2009 est.)

GDP - real growth rate:

-14.1% (2009 est.)
country comparison to the world: 211
2.1% (2008 est.)
7.9% (2007 est.)

GDP - per capita (PPP):

$6,400 (2009 est.)
country comparison to the world: 128
$7,500 (2008 est.)
$7,200 (2007 est.)
note: data are in 2009 US dollars

GDP - composition by sector:

agriculture: 10%
industry: 31.2%
services: 58.8% (2009 est.)

Labor force:

21.15 million (2009 est.)
country comparison to the world: 29

Labor force - by occupation:

agriculture: 19.4%
industry: 24.2%
services: 56.4% (2005)

Unemployment rate:

4.8% (2009 est.)
country comparison to the world: 45
2.3% (2007 est.)
note: officially registered; large number of unregistered or underemployed workers

Investment (gross fixed):

24.9% of GDP (2009 est.)
country comparison to the world: 44

Budget:

revenues: $26.35 billion
expenditures: $34.37 billion (2009 est.); note - this is the planned, consolidated budget (2009 est.)

Inflation rate (consumer prices):

16.5% (2009 est.)
country comparison to the world: 213
25.2% (2008 est.)

Commercial bank prime lending rate:

17.49% (31 December 2008)
country comparison to the world: 71
11.33% (31 December 2007)

Stock of domestic credit:

$101.1 billion (31 December 2008)
country comparison to the world: 39
$87.13 billion (31 December 2007)

Agriculture - products:

grain, sugar beets, sunflower seeds, vegetables; beef, milk

Industries:

coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing (especially sugar)

Industrial production growth rate:

-25% (2009 est.)
country comparison to the world: 166

Oil - production:

353,000 bbl/day (2008 est.)
country comparison to the world: 37

Natural gas - production:

19.8 billion cu m (2008 est.)
country comparison to the world: 30

Current account balance:

$-162 million (2009 est.)
country comparison to the world: 83
$-12.76 billion (2008 est.)

Exports:

$41.49 billion (2008 est.)
country comparison to the world: 51
$67.72 billion (2007 est.)

Exports - commodities:

ferrous and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, food products

Exports - partners:

Russa 23.5%, Turkey 6.9%, Italy 4.4% (2008)

Imports:

$45.58 billion (2009 est.)
country comparison to the world: 47
$83.81 billion (2008 est.)

Imports - commodities:

energy, machinery and equipment, chemicals

Imports - partners:

Russia 22.7%, Germany 8.4%, Turkmenistan 6.6%, China 6.5%, Poland 5% (2008)

Debt - external:

$88.92 billion (31 December 2009 est.)
country comparison to the world: 35
$101.7 billion (31 December 2008 est.)

Stock of direct foreign investment - at home:

$46.99 billion (31 December 2009 est.)
country comparison to the world: 51
$41.77 billion (31 December 2008 est.)

Stock of direct foreign investment - abroad:

$2.155 billion (31 December 2009 est.)
country comparison to the world: 61
$1.905 billion (31 December 2008 est.)

Exchange rates:

Source: CIA - The World Factbook