The Evaluation of Social and Economic Situation in Ukraine

 

 

In recent years, the Ukrainian economy, as evidenced  through the basic macroeconomic parameters, has experienced a number of positive qualitative and quantitative changes. The Ukrainian economics has witnessed a period of dynamic growth, low deficit and curbed inflation. This dynamic surge is reflected in the growth of GDP – from 2.6% to 12.1% cent annually in the last five years. The recent years have brought the inflation of 10 to 12%, the Hryvna (UAH) exchange rate has remained stable and the exports have been competitive.

 

Table 1.  The indicators of economic growth in Ukraine in the years 2003-2006.

 

Indicator

2003

2004

2005

2006

GDP (million UAH)

264,165

344,822

418,529

535,860

GDP (increase in % compared to the previous period)

9.4

12.1

2.6

7.1

Industrial production (million UAH)

220,605.0

326,544.0

385,398.5

460,371.9

Industrial production (increase in % compared to the previous period)

15.8

12.5

3.1

6.2

Agricultural production (billion UAH)

64.5

83.5

92.5

94.3

(increase in % compared to the previous period)

– 9.9

19.1

4.0

0.4

Construction industry (million UAH)

– construction and assembly

13,337

20,800

25,500

38,031

(increase in % compared to the previous period)

26.5

17.3

– 6.6

9.8

Transport of goods

(billion tonkilometers)

450.7

469.4

460.6

477.2

(increase in % compared to the previous period)

11.9

5.5

– 1.3

4.2

Telecommunications services (million UAH)

13,226.0

21,126.0

27,447.0

33,491.5

Retail trade (million UAH)

49,994

65,738

157,502

123,668

(increase in % compared to the previous period)

20.5

20.0

22.4

25.3

Retail and wholesale trade

(increase in % compared to the previous period)

14.4

17.8

8.3

no data

Export (million USD)

23,080.0

32,672.3

34,286.8

38,367.7

(increase in % compared to the previous period)

28.5

41.6

5.0

12.1

Involved (million USD)

23,021.0

28,996.0

36,141.1

45,034.5

(increase in % compared to the previous period)

35.6

26.0

24.6

24.6

Trade exchange balance (million USD)

1,288.0

4,873.0

– 1,854.3

– 6,666.8

Direct foreign investment in Ukraine (incrementally in million USD)

1,411.0

1,711.0

7,328.2

21,186.0

Average monthly salary (UAH)

462.3

589.6

806.2

1,044.0

Average monthly real salary (increase in % compared to the previous period)

15.2

23.8

20.3

29.2

Official unemployment rate (%)

3.6

3.6

3.1

2.7

Unemployment rate acc. to ILO methodology (%)

9.1

8.6

7.6

6.8

CPI indicator  (% - from December to December)

8.2

12.3

10.3

11.6

Wzrost cen artyku³σw zaopatrzeniowych (%)

11.1

24.1

9.5

14.1

Budget income (billion UAH)

75,286

90,593

134,030

171,748

Budget income (% GDP)

28.5

26.3

32.8

32.6

Budget expenditure (billion UAH)

75,793

102,385

141,765

175,235

Budget expenditure (% GDP)

28.7

29.7

31.9

33.2

Budget deficit (billion UAH)

– 507

– 11,792

– 7,735

3,713

Budget deficit (% GDP)

– 0.2

– 3.4

0.9

0.7

Foreign currency reserve (billion USD)

6,937

9,525

19.4

22.25

Average exchange rate (UAH/USD)

5.33

5.30

5.05

5.05

Average credit interest in commercial banks (%)

17.9

17.7

16.4

14.1

Average deposit interest in commercial banks (%)

7.1

7.9

8.0

7.6

The increase in commercial bank loans (increase in % compared to the previous period)

61.4

30.6

62.0

171.0

The increase in commercial bank deposits

(increase in % compared to the previous period)

62.7

35.2

60.0

138.8

Population (million)

47.6

47.3

46.96

46.25

 

Source: own calculation following the statistical data.

 

 

Gross Domestic Product (GDP)

The real Gross Domestic Product of Ukraine has been constantly increasing since the year 2000. In 2003 GDP totalled 264.1 billion UAH, which is 5,505 UAH per capita (820 UAH more than in 2002)[1]. In 2006 GDP reached over 538.6 billion UAH. However, the year of 2005 revealed a drop in the real GDP growth; this may be a warning sign of the prospective economic problems of Ukraine.

 

Chart 1. Ukrainian real GDP in the years 1996-2006 (nominal values and changes in per cent compared to the previous year)

 

Pole tekstowe: Bln HryvnasPole tekstowe: change

 

Source: own study on the basis of: the annual report of the National Bank of Ukraine, 2003, p. 14; the data of the International Statistical Board of the Commonwealth of Independent States http://www.cisstat.com/rus/index.htm (date of download 4 June 2005); the data of the National Bank of Ukraine http://www.bank.gov.ua/Macro/index.htm (date of download 4 February 2008).

 

In the first quarter of 2005, the Ukrainian GDP increased by 5% (but in the first quarter of 2004 the increase was 11.5%). This shows the decline in economic growth. The highest growth of the added value in 2005 was reported in the armaments industry (7.1%), transportation (6.8%) and farming (5.7%)[2].

 

Chart 2. Added value in main economy branches (change rate compared to the previous year)

 

 

Source: own study on the basis of: the annual report of the National Bank of Ukraine, 2003, pp. 148–149; the Bulletin of the National Bank of Ukraine, no. 3/2005 (144), p. 3; the data from the Ukrainian Ministry of Finance http://www.minfin.gov.ua/control/uk/publish/article?art_id=51194&cat_id=52319 (date of download 6 March 2005 and 12 February 2008).

 

In recent years the growth of GDP had been achieved through the activity of the main branches of economy. The high share of heavy industry and construction industry in the GDNP has shown an elevated internal demand and investment demand as well as the existing overall economy condition for exports. Yet, in 2005 there was a drop of added value trade and construction signalling the decline of consumption and investment. In the following years, these alarming trends were slowed down.

 

Table 2. Production growth/drop rate in the basic branches of Ukrainian industry (in % compared to the previous year)

 

Selection

2002

2003

2004

2005

2006

2007

Industry in total

7.0

15.8

12.5

3.1

6.2

10.2

Mining industry

2.3

5.5

4.1

4.4

5.8

2.7

Food industry

8.4

20

12.4

13.7

10.0

10.0

Light industry

0.4

4.0

13.6

0.3

– 1.9

0.4

Chemical industry

6.5

16.8

14.4

9.8

3.2

6.2

Steel industry

3.9

14.3

12.0

– 1.5

8.9

8.3

Machine industry

11.3

35.8

28.0

7.1

11.8

28.6

Power industry

1.1

4.7

– 1.1

2.9

6.7

3.2

 

Source: Annual Report, National Bank of Ukraine, 2006.

 

Recently, the structure of GDP use has been marked by the fluctuation of consumption and investment (savings). Net export fluctuates from 1.5 to 4.1% of GDP and chiefly depends upon the global demand for Ukrainian export goods[3].

The development and realisation structure of the GDP in 2005 and 2006 is the following.

 

Table 3. The GDP structure by expenditure (in %)

 

Selection

2005

2006

Consumption

76.5

78.6

Investment

22.6

24.3

Foreign trade balance

0.9

(– 2.9)

June total

100.0

100.0

GDP total (mld UAH)

441.5

537.7

 

Source: Annual Report, National Bank of Ukraine, 2006, p. 17.

 

Evaluating the presented data, it is necessary to stress that in Ukrainian economy that has been a number of positive changes manifested in the consumption growth, investment and the GDP. The investment dynamics is latterly higher than consumption, which is a positive sign.

 

Table 4.  The GDP structure by income (in %)

 

Selection

2005

2006

Salaries and self-employment income

49.1

49.4

Taxes net

12.7

13.5

Gross corporate revenue

38.2

37.1

GDP total

100.0

100.0

GDP total (mld UAH)

441.5

537.7

 

Source: Annual Report, National Bank of Ukraine 2006, p. 17.

 

 

Condition of state budget

In recent years, the income of the training budget has accounted for 27 to 28% of GDP. In 2004 the income totalled over 81 billion UAH. The greater part of the budget income is obtained from taxes (68.8% of the overall income). In 2002 there was a budget surplus of 1.6 billion UAH; however, in 2003 and 2004 the budget revealed a deficit of 0.49 6.2 billion UAH respectively. As far as the structure of budget expenditure in 2004 is concerned, the main expenditure was social and cultural initiatives (29.3% of the overall expenditure) and general state expenditure (11.3%, including 3.5% for debt service). The deficit continued in the years 2005-2007.

 

Chart 3. Budget income, expenditure and deficit compared to GDP in the years 1995-2006. 

 

 

 

Industrial and agricultural production

The main stimulus for economic growth over recent years has been the dynamics of industrial production which accounted for one third of the GDP. The accelerated growth of industrial production was reported at the beginning of 2003 and reached its climax in March 2004.  It was a breakthrough period.in the consecutive months of 2004 and in 2005 the growth rate of industrial production was decreasing. The year 2006 saw a reverse trend but in 2007 it turned negative.

 

Chart 4. The growth rate of industrial production (accumulated growth in % compared to the same period of the previous year)

 

 

Source: State Statistics Committee of Ukraine http://www.ukrstat.gov.ua/druk/soc_ek/2003/arh_s_e.html (date of download 5 June 2005 and 12 February 2008).

 

In 2003 the growth rate industrial production reached 15.8%. The overall value of produced goods and provided services in 2003 totalled 220.6 billion UAH[4]. The quick production growth resulted from favourable export conditions and increased investment demand in some enterprises (for example, steelworks) as well as from considerable growth in the machine industry and for industry in consequence of an elevated consumption (the improvement of financial situation of Ukrainians)[5].

 

Chart 5. Production growth/drop rate in main branches of Ukrainian industry (in % compared to the previous year)