What do we know about the Ukrainian economy?
youUkraine is the second largest country in Europe after Russia. It is an emerging market economy categorized as “lower middle income” by the World Bank. The country is well known for its black “chernozem” soil, and it is often nicknamed the land of “brains and grains.”
Here is an overview of the Ukrainian economy.
The 1990s were difficult for the Ukrainian economy, like the majority of countries that emerged after the dissolution of the USSR. In its early years as an independent nation, almost all economic indicators reflected a broken state of its economy in the form of hyperinflation, declining production, and bloat. budget deficit.
“During the first three years after independence (1992-1994), Ukraine implemented inflationary policies which led to a sharp depreciation of the currency (inflation peaked at 10,200% in 1993) and a rapid decline in the economy,” a statement read. IMF report. “In mid-1994, the new government decided to change course and embark on a program of adjustment and reforms aimed at correcting past mistakes and liberalizing the economy.”
The Ukrainian economy is estimated to have contracted annually between 9.7% and 22.7% between 1991 and 1996. Another database shows that Ukraine’s real GDP fell by a total of 62.1% between 1991 and 1998. The economy was negatively affected by the 1998 Russian default crisis.
The year 2000 marked a new beginning with a growth of the country’s GDP of 5.9%. During the years 2000-2004, GDP growth averaged 8.4%, driven mainly by industries such as steel production and food processing. The devaluation of its currency, the hryvnia, boosted its exports, which jumped about 42% in 2004. The year was also marked by the Orange Revolution in Ukraine.
“Ukrainian government officials eliminated most tax and customs privileges in a March 2005 budget law, which increased economic activity in Ukraine’s large underground economy,” according to a report by Moody’s.
GDP growth was 5.1% between 2005 and 2008. Ukraine was hard hit by the external shocks of the 2008-09 global financial crisis. Its GDP contracted by almost 15.1% in 2009 and growth remained stagnant until 2013.
Furthermore, Ukraine experienced serious economic and security-related problems during the period 2014-2015. The conflict in eastern Ukraine and falling commodity prices have rocked its economy, which contracted by 6.8% and 9.8% in 2014 and 2015, respectively.
The situation eventually stabilized and its economy grew by 2.4% in 2016. In the post-conflict period from 2014 to 2019, the government carried out significant fiscal consolidation, moved to a exchange rate, reformed energy tariffs and worked to bring more transparency. . Ukraine recorded growth of 2.4%, 3.5% and 3.2% in 2017, 2018 and 2019, respectively.
In terms of sectors, agriculture is an important component of its economy. Ukraine was once known as the breadbasket of the former Soviet Union. Thanks to its rich soil and vast land, agriculture contributes more than 9% of its GDP. Today, Ukraine is the bread basket of the European region.
According to Food and Agriculture Organization United Nations (FAO), “A third of the world’s stock of fertile black soils, which cover more than half of the arable land of Ukraine, a wide variety of climatic zones and favorable temperature and humidity regimes, provides attractive conditions for the production of a wide range of crops, including grains and oilseeds.
Ukraine ranks among the world’s leading producers of cereals, especially wheat, corn and barley.
It is also home to rich mineral resources. The country has abundant reserves coal, iron ore, natural gas, manganese, salt, petroleum, graphite, sulfur, kaolin, titanium, nickel, magnesium, wood and mercury. Ukraine ranks second for gas reserves in Europe, and exports of goods and services contribute around 40% of its GDP. This percentage was around 52% in 2015.
In January 2022, Ukraine reported that its inflation was at a four year old top by 10.3%. The country’s National Bank raised interest rates five times in 2021 to 9% after cutting rates in 2020 to support the economy during the pandemic. The IMF predicted that the country GDP grew by 3.5% in 2021 and forecasts 3.6% growth for 2022. Ukraine’s GDP of $181.04 billion is expected to reach $290.1 billion by 2026. However, the current crisis will disrupt most likely all projections. The World Bank prepares a loan of 3 billion dollars wrap in the coming months to support Ukraine.
Disclaimer: The author has no position in the stocks mentioned. Investors should view the above information not as a de facto recommendation, but as an idea for further consideration. The report has been prepared with care and any exclusions or errors in it are completely unintentional. The data mentioned is based on reports from the IMF, the World Bank and other institutions such as the FAO, as well as research papers.
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