Burlakova O.M., Finogeeva O.V., Kovalchuk T.I.

Oles Honchar Dnipropetrovsk National University, Ukraine

UKRAINE ECONOMY

Ukraine represents one of the top thirty world economies, with below average per capita income, and above average economic growth. In the Soviet times, the economy of republic was the second largest in the Soviet Union, being an important industrial and agricultural component of country's planned economy. With the collapse of Soviet system, the country progressed toward a market economy, but the move was somewhat longer and more painful than the proponents of shock therapy were to advise. In 1991, the government liberalized most prices in order to combat widespread product shortages, and was successful in overcoming the problem. In the same time, the government continued to subside the government-owned industries and agriculture by uncovered monetary emission [1]. The loose monetary policies of early 1990s pushed inflation to hyperinflationary levels. For the year 1993 Ukraine had the world record for inflation in one calendar year. The prices stabilized only after the introduction of new currency, hryvnia in 1996. The country was also slow in the implementation of structural reforms. Following independence, the government erected a legal framework for privatization. However, widespread resistance to reforms within the government and from a significant part of population soon stalled the reform efforts. A large number of governed-owned enterprises were exempt from the privatization process. Meantime, by 1999, the output had fallen to less than 40% of the 1991 level [2]. Since the late 1990s the government has pledged to reduce the number of government agencies, streamline the regulatory process, create a legal environment to encourage entrepreneurs, and enact a comprehensive tax overhaul. Outside institutions –particularly the IMF – have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support. But reforms in some politically sensitive areas of structural reform and land privatizations are still lagging. In early 2000s the economy showed strong export-based growth of 5% to 10%, with industrial production growing more than 10% per year. The growth was largely attributed to a surge in exports of metals and chemicals to China. In 2005, the economic growth temporary slowed down due to unfavorable changes in terms of trade, as world energy prices went up and metal prices went down. In 2006, the economy is again experiencing above 5% growth. The growth was undergirded by strong domestic demand and growing consumer and investor confidence. The current Ukrainian economy is a typical example of a post-soviet era developing economy. The World Bank classifies Ukraine as a lower middle–income state. Some significant issues are underdeveloped infrastructure and transportation, corruption and bureaucracy, and a lack of modern-minded professionals –despite the large number of universities. But the rapidly growing Ukrainian economy has a very interesting emerging market with a relatively big population, and large profits associated with the high risks [3]. The Ukrainian stock market grew up 10 times between 2000 and 2006, including the tremendous 341% growth in 2004, followed by 28% growth in 2005, and 24% growth in 2006. In a cross-country comparison, Ukraine is still one of the relatively poor and corrupted countries in Europe. The average nominal salary in Ukraine on September 2006 was 1004.1 UAH which is around 150 EUR, according to the Ministry of Economy of Ukraine. For 2006, the Index of Economic Freedom of Ukraine was 3.24, rank 99 amongst 157 states; the Corruption Perceptions Index of Ukraine was 2.8, rank 99 amongst 163 states. The country imports most energy supplies, especially oil and natural gas, and to a large extent depends on Russia as the only monopolistic energy supplier, although lately Ukraine has been trying to diversify its sources. With rich farmlands, a well–developed industrial base, highly trained labor force of 20 million, and good education system, Ukraine has the potential to become a major European economy. After a robust 8-year expansion beginning in 2000 that saw real GDP expand 75%, Ukraine’s economy experienced a sharp slowdown in late 2008, which continued through 2009. After contracting 15.1% in 2009, GDP is estimated to have bounced back only 4.2% in 2010 and is forecast to grow between 4.0% and 4.6% in 2011. Ukraine’s economy remains burdened by excessive government regulation, corruption, and lack of law enforcement, and while the government has taken steps against corruption and small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and to create a market system for agricultural land. President Yanukovych chairs a Committee on Economic Reform, and in 2010 Ukraine developed an economic reform plan for 2010-2014. In December 2010 a comprehensive new tax code was passed by parliament and signed into law, provoking major street protests in Kyiv.Ukraine ostensibly encourages foreign trade and investment [4]. Foreigners have the right to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event property were to be nationalized by a future government. However, the country's complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and particularly corruption have discouraged broad foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment from oversees.

Literature:

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