UKRAINE


Total area: 603,700 sq km (slightly smaller than Texas)
Population:  45.4 million
Government type: Unitary semi-presidential constitutional republic
Administrative division: Crimea Autonomous Republic, 24 provinces (called „oblast“), and 2 cities with special status
Capital + other major cities: Kyiv (Kiev) (2.80 million) + Kharkiv (1.43 million), Dnipropetrovsk (1.03 million), Donetsk (1.02 million), Odessa (1.0 million)
Currency: hryvnia (UAH)
Languages: Ukrainian (official) 67%, Russian 24%, plus minorities speaking Romanian, Polish, and Hungarian
Ethnicity: Ukrainian 77.8%, Russian 17.3%, Belarusian 0.6%, Moldovan 0.5%, Crimean Tatar 0.5%, Bulgarian 0.4%, Hungarian 0.3%, Romanian 0.3%, Polish 0.3%, Jewish 0.2%, other 1.8%
Religion: Ukrainian Orthodox 50%; Ukrainian Greek Catholic 8-10%; Ukrainian Autocephalous Orthodox 1-2%; Roman Catholic, Protestant, Muslim, Jewish (<1% each)
President: (Mr.) Petro POROSHENKO (since 7 June 2014)
Prime Minister: (Mr.) Volodymyr HROISMAN (since 14 April 2016)
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KEY FEATURES

  • Largest country within Europe
  • Large consumer market with 6 cities of 1 million population or more
  • Large heavy-industry base
  • Strategic location at the crossroads of European, Russian and Asian markets
  • One of the largest refiners of metallurgical products in Eastern Europe
  • "Breadbasket of Europe" - exports substantial amounts of grain, vegetables, sugar beets, sunflower seeds, milk and meat.
  • Underdeveloped transport infrastructure
  • Battling corruption, overregulation and bureaucracy
  • Current political and economic instability; temporarily occupied territory in Crimea and ‘Anti-Terrorist Operation’ in eastern Ukraine


MACROECONOMIC OVERVIEW

Selected economic indicators, Ukraine, 2010 - 2016

    2010 2011 2012 2013 2014 2015 2016*
GDP
Real GDP growth
%
4.1
5.2
0.2
0.0
-6.6
-9.9
1.5
GDP at current prices
€ bn
102.9
117.2
136.8
135.2
99.6
81.6
Foreign trade
Exports
€ bn
38.8
49.3
53.6
47.7
40.6
34.4
Imports
€ bn
46.3
59.4
65.9
58.0
40.9
33.8
Balance
€ bn
-7.4
-10.0
-12.3
-10.3
-0.4
0.6
Prices
CPI - average inflation rate
%
9.4
8.0
0.6
-0.3
12.1
48.7
15.1
PPI - industry - average
%
18.7
14.2
0.3
1.7
31.8
25.4
Employment
Registered unemployment
%
8.1
7.9
7.5
7.2
9.3
9.5
9.2
Average monthly gross wage
214
239
296
309
221
173
Exchange rates
UAH/USD average
7.94
7.97
7.99
7.99
11.89
21.84
UAH/EUR average
10.53
11.09
10.27
10.61
15.72
24.23

*2016 - forecast
State Statistics Committee of Ukraine, Ministry of Economics of Ukraine, European Commission, IMF, 2016



After Ukraine’s macroeconomic situation became stabilized following almost a decade of steep economic decline resulting from the painful transition process from state planning to a market-driven economy, the country enjoyed robust economic growth in 2006 and 2007. The growth was halted in during the global financial crisis of 2008, but the Ukrainian economy recovered and achieved positive GDP growth in 2010 and 2011. Although the economy recorded another slump in 2013, the biggest turmoil had yet to come.

Conflict in Eastern Ukraine and Annexation of Crimea by Russia

Following the Ukrainian President Yanukovych’s refusal to sign an association agreement with the European Union on 21 November 2013, Ukraine fell into heavy crisis and the Euromaidan movement started.

Russia reacted in the early 2014 with the annexation of Crimea, followed by the War in Donbass that started in the spring of 2014.

The main direct economic consequence of the Crimea annexation is the loss of the Black Sea gas fields and a possible deterioration in the country’s energy sector. Loss of Crimean seaports can lead to short-term losses for their major customers – grain exporters.

The economic blockade of pro-Russian separatists controlled regions came on top of enormous infrastructure damage as a result of the conflict with Ukraine. In Donetsk Oblast (region), industrial production fell by 59 percent in 2014, while an 85 percent drop was registered in Luhansk Oblast. Before the crisis, the two oblasts accounted for 20 percent of Ukrainian industrial production.

Ukraine's economy shrank by 6.6% in 2014, and this continued with a 9.9% decline in GDP in 2015. In December 2015, Ukraine declared a moratorium on debt payments to Russia and entered a de facto state of default.

At the end of March 2014, Ukraine reached an IMF staff-level agreement on a new two-year loan of USD 14-18 billion. The IMF program would unlock financial assistance programs from other sources, and total financial support could reach USD 27 billion over the next two years.

Ukraine signed The Ukraine–European Union Association Agreement in 2014. This treaty establishes a political and economic association between the parties. The agreement has not entered into force, but parts are applied provisionally. The agreement commits Ukraine to economic, judicial, and financial reforms to converge its policies and legislation to those of the European Union. Ukraine agreed to gradually conform to EU technical and consumer standards and the EU committed to provide Ukraine with political and financial support, access to research and knowledge, and preferential access to EU markets.

After the crisis-torn economy contracted by almost 10% last year, the situation appears to be improving significantly in the first half of 2016. In April, the Parliament approved Volodymyr Hroisman as the new prime minister, thus ending months of political deadlock and paving the way for the government to turn its attention back to passing the reforms the IMF has demanded.

Future success of Ukraine is strongly dependent on the final solution of the current political turmoil, speed of market reforms as the country’s burden resides in significant government regulation, corruption, and insufficient law enforcement.


KEY SECTORS


The key sectors of the Ukrainian economy include coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, grain and sugar beets.

Ukraine has a broad (if aging) industrial base which is strong in ferrous metals and chemicals. This includes much of the former Union of Soviet Socialist Republic’s (USSR) space and rocket industry and a well-developed defence and security sector.


Agriculture
is the lead export sector in Ukraine. With 41.5 million hectares of agricultural land covering 70% of the country, agriculture is Ukraine’s largest export industry and generates 14% of GDP. Being a large grain producer, Ukraine is one of the six world largest exporters of wheat, supplying to 80 countries worldwide. The country is also the biggest exporter of sunflower oil and has substantial potential in growing and exporting rapeseed. Ukraine is also the third largest exporter of corn and fourth largest exporter of barley.


Machine-building
is the largest Ukrainian industrial sector. It accounts for over one-third of the employed and about a quarter of the total cost of industrial main assets and involves companies focused on metals, oil, chemical, mining, power generation, rolling, road construction and vehicles, farm machinery and equipment, equipment for the light and food industries, metal-cutting machine tools, shipbuilding and instrumentation.


Iron and steel industries

Ukraine’s machine building and metal-working industries depend on the production of ferrous and non-ferrous metals. Today, over 38,000 enterprises operate in the extraction and processing of metals and in the production of pipes and rolling stock. These include one of the world’s largest steel plants producing cast iron, steel, rolled stock, steel bars and pipes in Kryviy Rih, Dnipropetrovsk, Zaporizhzhia, Mariupol, and other cities.


Mining

Ukraine is one of the world's most important mineral producing countries, in terms of both the range and size of its reserves accounting for 5% of the world’s mineral resource stock. It has almost 8,000 separate deposits, harbouring some 90 different minerals, of which about 20 are economically significant - these include iron ore, coal, manganese (32% of global manganese production), uranium ore, natural gas, oil, salt, sulphur, graphite, titanium, magnesium, kaolin, nickel, mercury, etc. As for iron stocks, manganese, titanium and uranium ore, Ukraine is ranked first among European countries. Ukraine has also Europe's third-largest shale gas reserves at 1.2 trillion cubic meters.


Chemical industry

The multi-branch chemical sector of Ukraine includes chemical, petrochemical and chemical-pharmaceutic sub-sectors with over 1,600 enterprises and structural units. The sector accounts for nearly 10% of industrial fixed assets and over 5% of all those employed by Ukrainian industrial sector. The sector is represented by production of mineral fertilizers, sulfuric acid, coke products, synthetic fibres, caustic soda, and petrochemicals. The industrial plants are mainly in Kyiv, Korosten, Sumy and Fastiv.


Energy
Ukraine operates thermal power plants (steam turbine and diesel types), hydroelectric plants and nuclear power plants. The role of wind and solar power plants is also growing - the country has high average wind speeds, a good solar radiation profile, plentiful biomass raw materials, and numerous dams on the Dnieper River, all ideally suited for renewable energy.


Ukraine operates four nuclear power plants, including the Zaporizhia, Pivdennoukrains'k, Rivne and Khmelnytsky,and hydroelectric power generation cascades (6 large hydroelectric power stations on the Dnieper and 55 small stations on other rivers).




EXPORTS & IMPORTS


The main import commodities are energy, machinery and equipment, chemicals. Exported commodities include ferrous and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, food products.


Until recent years, Russia was Ukraine's largest trading partner with 25.7% of exports and 32.4% of imports recorded in 2012. By 2015 the EU became Ukraine's largest trading partner, accounting for more than a third of its trade.


Natural gas is Ukraine’s biggest import item and the main cause of the country’s structural trade deficit.


2015 export and import data:




Main import partners:
Russia – 20.0%
Germany – 10.6%
China – 10.1%
Belarus – 6.5%
Poland – 6.2%


Main export partners:
Russia – 12.7%
Turkey – 7.3%
China – 6.3%
Egypt – 5.5%
Italy – 5.2%


Ukraine external trade - 2015




See references for our track record in Ukraine.



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