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Ukraine Economy

In Soviet times, the economy of Ukraine was the second largest in the Soviet Union, being an important industrial and agricultural component of the country's planned economy. With the collapse of the Soviet system, the country moved from a planned economy to a market economy. The transition process was difficult for the majority of the population which plunged into poverty. Ukraine's economy contracted severely following the years after the Soviet collapse. Day to day life for the average person living in Ukraine was a struggle. A significant number of citizens in rural Ukraine survived by growing their own food, often working two or more jobs and buying the basic necessities through the barter economy.

In 1991, the government liberalized most prices to combat widespread product shortages, and was successful in overcoming the problem. At the same time, the government continued to subsidize government-owned industries and agriculture by uncovered monetary emission. The loose monetary policies of the early 1990s pushed inflation to hyperinflationary levels. For the year 1993, Ukraine holds the world record for inflation in one calendar year. Those living on fixed incomes suffered the most Prices stabilized only after the introduction of new currency, the hryvnia, in 1996.

The country was also slow in implementing structural reforms. Following independence, the government formed a legal framework for privatisation. However, widespread resistance to reforms within the government and from a significant part of the population soon stalled the reform efforts. A large number of government-owned enterprises were exempt from the privatisation process. In the meantime, by 1999, the GDP had fallen to less than 40 percent of the 1991 level, but recovered to slightly above the 100 percent mark by the end of 2006. In the early 2000s, the economy showed strong export-based growth of 5 to 10 percent, with industrial production growing more than 10 percent per year. Ukraine was hit heavyily by the economic crisis of 2008 and in November 2008, the IMF approved a stand-by loan of $16.5 billion for the country.

Ukraine's 2007 GDP (PPP), as calculated by the CIA, is ranked 29th in the world and estimated at $359.9 billion. Its GDP per capita in 2008 according to the CIA was $7,800 (in PPP terms), ranked 83rd in the world. Nominal GDP (in U.S. dollars, calculated at market exchange rate) was $198 billion, ranked 41st in the world. By July 2008 the average nominal salary in Ukraine reached 1,930 hryvnias per month. Despite remaining lower than in neighbouring central European countries, the salary income growth in 2008 stood at 36.8 percent. According to the UNDP in 2003 4.9 percent of the Ukrainian population lived under 2 US dollar a day and 19.5 percent (UNDP figures) of the population lived below the national poverty line that same year.

Ukraine produces nearly all types of transportation vehicles and spacecraft. Antonov airplanes and KrAZ trucks are exported to many countries. The majority of Ukrainian exports are marketed to the European Union and CIS. Since independence, Ukraine has maintained its own space agency, the National Space Agency of Ukraine (NSAU). Ukraine became an active participant in scientific space exploration and remote sensing missions. Between 1991 and 2007, Ukraine has launched six self made satellites and 101 launch vehicles, and continues to design spacecraft. So to this day, Ukraine is recognised as a world leader in producing missiles and missile related technology.

The country imports most energy supplies, especially oil and natural gas, and to a large extent depends on Russia as its energy supplier. While 25 percent of the natural gas in Ukraine comes from internal sources, about 35 percent comes from Russia and the remaining 40 percent from Central Asia through transit routes that Russia controls. At the same time, 85 percent of the Russian gas is delivered to Western Europe through Ukraine.

The World Bank classifies Ukraine as a middle-income state. Significant issues include underdeveloped infrastructure and transportation, corruption and bureaucracy. In 2007 the Ukrainian stock market recorded the second highest growth in the world of 130 percent. According to the CIA, in 2006 the market capitalisation of the Ukrainian stock market was $111.8 billion. Growing sectors of the Ukrainian economy include the information technology market, which topped all other Central and Eastern European countries in 2007, growing some 40 percent.

Source: Wikipedia Encyclopedia



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