Economy and macro indicators

Ukraine is an agro-industrial nation. The country’s most developed industrial sectors are metallurgy, energy (nuclear power plants and a full cascade of hydroelectric stations on the Dnipr River), as well as chemicals and mining (coal, ore). The most economically developed regions are the Donbass (the Donetsk and Luhansk regions), Pridneprovye (the Dnipropetrovsk and Zaporizhia regions) and the cities of Kyiv, Kharkiv, Odesa and Lviv. Following the collapse of the Soviet Union, the economy of independent Ukraine was plunged into crisis as a result of a breakdown in cooperation between various enterprises working in former Soviet republics. This resulted in de-industrialization despite the fact that Ukraine was not a post-industrial nation like many western countries. Western Ukraine has traditionally been a more agrarian and tourist region. Ukraine has been a member of the World Trade Organization since May 2008.

Ukraine possesses a considerable amount of mineral resources, particularly coal, although it also has oil and gas reserves in the Carpathian region as well as the Black Sea and Crimea oil and gas region, including the Black Sea shelf. (Internal oil resources cover 15%-20% of domestic oil consumption, while internal gas resources cover 25% of gas consumption.) The national extraction industry is currently in crisis: almost 70% of mines are due to be closed owing to losses. A state statistics committee has been set up to compile statistical data on the Ukrainian economy and a number of international information agencies and organizations are dealing with this issue as well.

The most developed sectors of the Ukrainian economy are industry and energy transportation.

The most economically developed regions of the country are Donbass (the Donetsk and Luhansk regions), Pridneprovye (the Dnipropetrovsk and Zaporizhia regions) and the cities of Kyiv, Kharkiv, Odesa and Lviv. In 2006, the city of Kyiv accounted for the largest contribution to the country’s real GDP at 17.5% (or 35,210 hryvni per capita), followed by the predominantly industrial regions Donetsk at 13.3% (15,725 hryvni per capita), Dnipropetrovsk at 9.6% (15,239 hryvni), Kharkiv at 5.9% (11,353 hryvni), Zaporizhia at 4.6% (13,369 hryvni), Odesa at 4.6% (10,379 hryvni) and Luhansk at 4.4% (10,085 hryvni). Following the collapse of the Soviet Union, the economy, and particularly the industry, of independent Ukraine underwent the process of intense de-industrialization despite the fact that Ukraine was not a post-industrial nation like many western countries. Western Ukraine has traditionally been a more agrarian region. In the mid-1990s, despite a demographic crisis, unemployment remained high, which led to a record wave of labor or economic emigration abroad (particularly to Russia and Western Europe) and to Kyiv to a lesser degree. Money transfers from Ukrainian migrants account for a significant (and often undisclosed) share of Ukrainian GDP.

Ukrainian real GDP growth rates by percentage:

Year	As % of previous year	As % of 1990
1991	91.3	91.3
1992	90.1	82.3
1993	85.8	70.6
1994	77.1	54.4
1995	87.8	47.8
1996	87.8	43.0
1997	97.0	41.7
1998	98.1	40.9
1999	99.8	40.8
2000	105.9	43.2
2001	109.2	47.2
2002	105.2	49.7
2003	109.6	54.4
2004	112.1	61.0
2005	102.7	62.7
2006	107.3	67.3
2007	107.3	72.2
2008	102.1	74.1

 

Ukraine’s coal industry chiefly consists of enterprises working in the Donetsk, Lviv-Volyn coal and Dnipro coal basin. Donbass remains the primary source of coal in Ukraine.

 

Metallurgy: the main sectors are ferrous and nonferrous metals, coke chemistry and pipe production. The ferrous metals industry accounts for almost half of Ukraine’s heavy industrial exports.

 

 

Light industry: Ukrainian light industry has seen a slow but steady decline in turnover since 1990. Plants producing clothing reduced output 7.9% in 2008. Unequal conditions for Ukrainian light industry market participants and importers are the main factors behind the downfall of light industry. Total output at light industry enterprises fell 3.4% in 2008 with the biggest decline seen in clothing production. According to the State Statistics Committee, the production of coats, skirts, pants and raincoats dropped by 22%-41% in 2008, while the production of men’s suits fell by 9%. Only the shoe industry saw a slight uptick in output in 2008. Imports of clothing, meanwhile, grew by more than 110% in January-November 2008 compared to 2007, although imports from developed nations to Ukraine were at a minimal level. Of the 1,643,336 women’s knitted blouses and shirts imported to Ukraine over the first eleven months of 2008, only 668 of them came from France, while 148 such articles of clothing were imported from Denmark. The bulk of clothes, more specifically about 1.5 million items, came from Asian countries. Eastern importers have long had a hold on the Ukrainian consumer with their cheap labor and raw materials.

Timber industry: Ukraine’s timber resources are extremely limited with forests covering only 14.3% of the country’s territory. The bulk of the forests are concentrated in the Carpathians, Polesye and the Crimean mountains. Ukraine has several types of valuable timber: beechwood, oak, spruce, pine and ashwood. The Carpathians and Polesye account for approximately 90% of the country’s logging industry. Ukraine’s forestland has been depleted by relentless exploitation. A large amount of timber is imported. The biggest challenges facing the Ukrainian timber industry is the full and more rational use of byproducts from preparation, the re-production of forests and an improvement in the ecological situation.

Pulp and paper industry: the setting up of enterprises in this industry is dictated by the availability of raw materials, water resources, the presence of electricity and a qualified workforce. Pulp and paper enterprises are mainly concentrated in forested areas such as the Carpathians and Polesye. The main components for receiving pulp are low-quality timber from coniferous and leafy types of trees as well as waste products from lumbering and woodworking. Pulp is used for the production of paper and cardboard. The largest enterprises in the industry are:

• paper and pulp plant in Zhidachov (Lviv region)
• cardboard and paper plant in Obukhov (Kyiv region)

There are also large plants in Kyiv, Rakhov, Kherson, Izmail, Kryukovka and Malina.

 

Oil refining: The Ukrainian fuel market (six oil refineries) is almost fully divided among foreign companies. Russian companies control two-thirds of the country’s oil refineries:

• TNK-BP – Lisichansk Oil Refinery
• Lukoil – Odesa Oil Refinery
• Tatneft (via Russian-Ukrainian joint venture Ukrnafta) – Kremenchug Oil Refinery
• Alliance Group (Russia) – Kherson Oil Refinery

The owners of the two remaining oil refineries:

• Privat Group – Nadvornyan Oil Refinery
• Alfa-Nafta and Privat Group – Drogobych Oil Refinery

The Lisichank, Odesa and Kherson oil refineries control a combined 62% of the Ukrainian fuel market. The companies sell gasoline to retail and sign contracts for wholesale supplies to agricultural enterprises.

Ukraine produces a small amount of its own oil, but most of it is imported, including from Russia.

Ukraine consumes about 16 million tons of petroleum products per year, including 5 million tons each of gasoline and diesel in addition to 6 million tons of fuel oil. Ukrainian oil refineries have capacity to refine 52 million tons per year. Average capacity utilization throughout the industry is approximately 40%.

 

Nuclear energy: State-owned nuclear energy company Energoatom manages the activities of the Ukrainian nuclear energy industry. As of 2006, Ukraine had four nuclear power plants with a total of 15 functioning power units.

 

Ukraine’s Nuclear Power Plants
Name of plant	Number of generating units	Type of unit	Location	Annual power output
Zaporizhia	6	VVER-1000	Energodar, Zaporizhia region, next to Kakhovka reservoir	40-42 bln kWh
South Ukraine	3	VVER-1000,	Yuzhnoukrainsk, Mykolayev region, on the banks of Yuzhny Bug	17-18 bln kWh
Rivne	4	2 VVER-440, 2 VVER-1000	Kuznetsovsk, Rivne region, near Stir River	11-12 bln kWh
Khmelnytsky	2	VVER-1000	Neteshin, Slavutsky district of Khmelnytsky region, near Goryn River	7 bln kWh

 

Ukraine also has two inactive nuclear power plants:

1. Chernobyl Nuclear Power Plant: decommissioned December 15, 2000.
2. Crimea Nuclear Power Plant: only the plant’s building has been erected. Construction was mothballed during Soviet times after it was discovered that the Crimea region’s seismic activity was underestimated during the plant’s drafting.

Russia’s TVEL Corporation is the monopoly supplier of nuclear fuel (TVEL prepares a large amount of fuel for Ukraine from Ukrainian uranium).

In 2004, the four Ukrainian nuclear power plants produced 53.2% of the country’s electricity. Ukraine plans to build nine new nuclear power generating units by 2030 and have another two units in various stages of construction.

Ukrainian nuclear plants are still equipped with Russian-produced VVER-440 and VVER-1000 reactors. Ukraine is currently planning to hold an international tender for the construction of new power units.

The Zaporizhia Nuclear Power Plant is equipped with an at-reactor dry storage facility for spent nuclear fuel, which was commissioned in August 2001 after work commenced at the second power unit to load spent heat-generating nuclear fuel assemblies into the first multi-functional airproof container. The plant’s dry storage facility has projected capacity of 380 containers, which will ensure the storage of spent fuel assemblies that will be removed from reactors during the plant’s entire lifespan. In December 2005, state-owned nuclear energy company Energoatom signed a contract with the U.S. company Holtec International on the design and construction of a dry type of storage facility for spent nuclear fuel. This facility will be used to store spent fuel from the country’s remaining three plants – Rivne, South Ukraine and Khmelnytsky. At present, fuel from these plants is exported to Russia.

 

Based on materials of the Ukrainian Statistics Committee (www.ukrstat.gov.ua).

 

Sovereign credit rating

Foreign currency liabilities	ССС+/Stable/С
National currency liabilities	B-/Stable/С
National scale rating	uaВВВ

 

Key macroeconomic indicators
(as % of previous year)

	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
GDP	87.8	90.0	97.0	98.1	99.8	105.9	109.2	105.2	109.6	112.1	102.7	107.3	107.9	102.1
Industrial production	88	95	99.7	99.0	104	112	114	107	116	112	103	106	110	97
Agricultural production	96	91	98	90	93	110	110	101	89	120	99.9	103	94	117
Fixed-capital investment	72	78	91	106	100.4	114	121	109	131	128	102	119	130	97
Cargo shipments	80	75	96	92	92	100	103	104	116	105	98	109	108	99.5
Retail turnover	86	95	102	95	96	106	115	116	120	120	122	126	129	118
Producer price index	270	152	108	113	131	121	109	103	108	120	117	110	120	136
Consumer price index	477	180	116	111	123	128	112	101	105	109	114	109	113	125
Exports to CIS	124	106	75	75	77	138	104	94	138	142	126	118	147	128
Exports to other countries	133	113	124	98	99	121	115	117	125	142	98	109	119	141
Imports from CIS	128	112	88	80	85	119	110	102	128	132	112	119	127	132
Imports from other countries	189	117	113	94	75	116	117	115	144	120	139	130	141	148

Key macroeconomic indicators in 2009
(As % of corresponding period of previous year)

 

Key macroeconomic indicators in 2009

 

Source: CIS Intergovernmental Statistics Committee

Industrial production index in 2009

(Change % to the corresponding previous period)

	January	January- February	January- March	January- April	January- May	January- June	January- July	January-August	January-September	January-October
Industrial production	65.9	67.2	68.1	68.1	68.1	68.9	69.6	70.4	71,6	73,6
Extracting and processing industry	62.7	64.7	65.6	66.0	66.2	67.2	67.9	68.9	70,2	72,2
Extracting industry	78.6	81.4	82.5	82.0	81.5	81.9	82.5	83.2	84,2	85,6
Extraction of energy resources	91.4	94.6	95.9	95.5	94.7	95.3	95.0	94.3	94,1	94,0
Extraction of resources except energy resources	60.8	63.8	64.8	64.6	64.7	65.4	67.4	69.7	72,0	75,0
Processing industry	58.4	60.4	61.3	62.0	62.4	63.5	64.3	65.4	66,7	68,8
including
Production of food, beverages and smokables	85.7	87.8	88.9	91.3	92.7	94.2	93.7	93.2	93,4	93,5
Consumer industry	61.6	62.5	62.5	64.2	64.7	66.9	68.7	69.8	70,6	71,4
textile production; production of clothes, fur and fur products	58.0	58.8	58.7	61.0	62.0	64.2	66.2	67.5	68,4	69,1
production of leather, leather products and other materials	77.8	79.1	79.0	78.0	76.4	78.7	80.2	80.2	81,0	81,7
Wood processing and production of wood products, except furniture	53.6	59.7	59.7	61.3	61.3	63.3	64.4	66.0	68,0	70,1
Pulp and paper production; publishing activity	69.4	74.5	76.1	77.3	77.1	77.2	77.6	78.0	78,6	78,9
Production of charred coal, and refinery products	102.4	93.4	92.6	90.3	87.5	86.6	86.4	86.8	89,6	92,4
Chemical and         petrochemical industry	50.4	56.4	61.3	63.6	64.2	65.8	66.8	68.1	69,5	71,4
Chemical production	50.9	57.9	62.8	64.8	65.0	66.5	66.9	68.0	69,4	71,4
Production of rubbers and plastics articles	48.0	51.3	56.2	59.8	61.6	63.8	66.4	68.3	69,7	71,3
Production of other non-metallic mineral goods	46.6	47.8	48.5	49.5	50.9	52.2	53.7	55.3	56,9	58,5
Metal production and production of ready-made metal goods	54.0	56.7	56.7	56.2	56.3	57.0	58.8	61.0	63,1	66,6
Engineering industry	41.7	44.4	45.4	46.3	46.4	47.5	47.5	47.8	48,6	50,3
Production of machines and equipment	44.9	49.3	49.7	51.0	51.0	52.8	53.3	53.9	55,2	58,2
Production of electric, electronic and optical equipment	50.0	54.8	58.4	60.7	61.8	66.3	66.3	65.8	66,5	67,8
Production of transport means and related equipment	35.7	36.2	36.4	36.2	35.9	35.2	35.0	35.4	35,9	36,8
Production and distribution of electrical power and water	84.8	82.9	84.8	83.7	82.9	82.6	82.7	82.5	83,0	85,0