Ukraine Economy Essay

2270 words - 10 pages

Overview Ukrainian Economy
POLITICS AT A GLANCE

CB RICHARD ELLIS

H1 2010

Quick Stats
Change from H2 ‘09 GDP Unemployment H1 ‘09

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The period following the election of Victor Yanukovych as Ukraine’s new president was unexpectedly mild. The decision by Ms. Tymoshenko, the former prime-minister and main rival of the current president, to abandon a challenge to the result and withdraw her complaint from the Supreme Court has helped remove some of the uncertainties about prolonged power transition. Other sources of instability, such as possible dissolution of Parliament were also removed given that Mr. Yanukovych has been very quick in forming a new coalition and ...view middle of the document...

3% compared with the previous three-month period, but was 4.9% higher than a year ago

Annual data Population (million) GDP (US$ billion; market exchange rate) GDP (US$ billion; purchasing power parity - PPP) GDP per head (US$; PPP) Exchange rate (av) UAH:USD
Source: Economist Intelligence Unit (EIU) * - EIU estimates

2009 45.8 117.4 290.1* 6,337* 7.79**

Historical Averages (%) Population growth Real GDP growth Real domestic demand growth Inflation FDI inflows (% of GDP)

2005-2009 -0.6 0.6 4.2 15.2 6.3

ECONOMIC OVERVIEW Executive summary

The worst economic crisis Ukraine has experienced in more than a decade has ended. After contracting 15.1% in 2009, the economy expanded by an estimated 6.3% y-o-y in six months to the end of June. Apart from improved external balance on the demand side and sustained agricultural and industrial output on the supply side, GDP was propped up by reactivated domestic consumer demand. Currently, the economic growth is forecast to average 4.3% over 2010-2014, which is slower than previously (5.9% over 1999-2003 and 6.4% over 2004-2008), but still faster than elsewhere in Europe. Should the authorities succeed in implementing their reform agenda, the growth could potentially accelerate to 6-7% per annum.
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©2010, CB Richard Ellis, Inc.

Economic policy

Overview Ukrainian Economy

The current administration has put forward a five-year reform plan, which among its key proposals included the following:
• Cut Corporate Income Tax to 20% in 2011 (from current 25%) with further stepped reduction to 17% in 2014; Cut VAT to 17% (from current 20%); Introduce real estate tax; Stabilize public finances by improving tax administration and expanding taxation base, introducing anti-corruption laws and adopting a law on state debt; Improve business climate by reducing the list of licensed economic activities (by 30% till 2011), simplifying business entry and exit procedures, privatizing state assets, bringing legislation and procedures in line with EU standards.

Average Annual GDP Growth over 2010-2014 (% change, y-o-y) 0% Russia Ukraine Poland Slovakia Romania Bulgaria Hungary Estonia CEE Slovenia Cz. Rep. World Norway Luxembourg Sweden Lithuania Cyprus Latvia Finland Switzerland Austria Belgium Germany Netherlands Denmark France Portugal UK Malta Spain Italy Greece Ireland
Source: Economist Intelligence Unit, Experian Business Strategies, Goldman Sachs

1%

2%

3%

4%

5%

6%

• • •

Although the authorities stopped short of setting too many deadlines for the proposed reforms, the direction they chose could have hardly been more sensible. The political calendar also favors resolute action, since the next parliamentary elections are scheduled for 2012, creating some breathing space after years of political turmoil. Still, we believe the pace of reforms is likely to be slow due to strong vested interests and highly conservative population. Ukraine’s challenging fiscal...

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