Ukraine Economy - History

Ukraine Economy - History

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Budget: Income .............. $18 Billion
Expenditure ... $21 Billion

Main Crops: Grain, sugar beets, sunflower seeds, vegetables; beef, milk

Natural Resources: Iron ore, coal, manganese, natural gas, oil, salt, sulfur, graphite, titanium, magnesium, kaolin, nickel, mercury, timber .

Major Industries: Coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food-processing (especially sugar)

Economic Development of the Ukraine: A Guide to Selected Information Sources

Agriculture in the face of changing markets, institutions and policies : challenges and strategies, edited by Alfons Balmann, Jarmila Curtiss, Kristi Dautzenberg, and Kathrin Happe. (Saale): IAMO, 2006. 536 p.
LC Call Number: S469.C36 A375 2006
LC Catalog Record: 2008386897
Table of Contents
Full Text [PDF file 3.5mb/ 553 p.]

Ahrend, R., de Rosa, D., and Tompson, W. "Russian Manufacturing and the threat of 'Dutch Disease'. A Comparison of Competitiveness Developments In Russian and Ukrainian Industry." OECD Economic Department. Working Papers , January 25, 2007. pp. 1-2, 4-55. Retrieved May 7, 2011, from ABI/INFORM Global. (Document ID: 189912842)

Balmaceda, Margarita M. Energy Leverage in Conditions of External Shock: The Case of Russian Energy Relations with Ukraine and Belarus, 2006-2009. APSA 2009 Toronto Meeting Paper. September 30, 2008. Available at SSRN:

Berg, Sanford, Chen Lin, and Valeriy Tsaplin. "Regulation of State-Owned and Privatized Utilities: Ukraine Electricity Distribution Company Performance." Journal of Regulatory Economics . Volume 28, number 3, pp. 259-287.
LC Call Number: HD3616.U45 J68
LC Catalog Record: 91642776
Also available online in Business Source Complete via EBSCOhost. Subscription resource: Online access limited to patrons onsite. (accessed May 9, 2011).

Building market institutions in post-communist agriculture : land, credit, and assistance, edited by David A.J. Macey, William Pyle, and Stephen K. Wegren. Lanham : Lexicon Books, c2004. 229 p.
LC Call Number: HD1992 .B755 2004
LC Catalog Record: 003027904
Table of contents

  • Land privatization and land market development: two "unsuccessful" cases, Kyrgyzstan and Uzbekistan / Peter C. Bloch
  • Russia's indeterminate land privatization: psychological aspects / Stephen K. Wegren
  • Successful cases: the Trans-Caucasian states (Armenia, Azerbaijan, Georgia) / Zvi Lerman
  • Rural finance without markets in Ukraine, 1991-2000 / David Sedik
  • Agriculture in the Czech Republic: dual production structures, dual credit markets / Dirk J. Bezemer
  • Finance, credit, and investments in Polish agriculture / Liesbeth Dries and Johan F.M. Swinnen
  • Missing the market: Kyrgyz agricultural policy and downstream linkages / Malcolm D. Childress
  • Technical assistance to agribusiness: why the Armenian case is promising but still indeterminate / Craig L. Infanger
  • Building market information systems in the transition economies: the USDA experience / Nancy Cochrane and Stefan Osborne
  • Conclusion / David A.J. Macey and Stephen K. Wegren.

Distortions to agricultural incentives in Europe's transition economies. edited by Kym Anderson and Johan Sinnen. Washington, D.C.: World Bank, c2008. 379 p.
LC Call Number: HD1920.7.Z8 D57 2008
LC Catalog Record: 2007048479
Table of Contents

Demyanenko, Serhiy I., Johnson, Thomas G., Meyers, William H., and Zorya, Sergiy I Refocusing agricultural and rural development policies in Ukraine: action plan for the road ahead. Washington, DC: USAID, 2005. 138 p.
LC Call Number: HD1995.U55 M48 2005
LC Catalog Record: 2007467334

Global supply chains, standards and the poor: how the globalization of food systems and standards affects rural development and poverty. edited by Swinnen, J.F.M. Wallingford, UK Cambridge, MA : CABI, c2007. 322 p.
LC Call Number: TX360.5 .G56 2007
LC Catalog Record:: 2006022824
Table of contents

Haney, Michael and Shkaratan, Maria. Mine Closure and its Impact on the Community: Five Years After Mine Closure in Romania, Russia, and Ukraine (June 12, 2003). World Bank Policy Research Working Paper No. 3083. Available at SSRN:

International Energy Agency. Ukraine energy policy review 2006. . Paris : OECD/IEA, c2006. 379 p.
LC Call Number: HD9502.U382 U37 2006
LC Catalog Record: 2007397270
Online Edition [PDF Format 4.49 MB/ 384 p.]

Osborne, Stefan, Trueblood, Michael A, Agricultural productivity and efficiency in Russia and Ukraine: building on a decade of reform. Washington, DC: United States Department of Agriculture, Economic Research Service, 2002. 29 p.
LC Call Number: HD1751 .A91854 no. 813
LC Catalog Record: 2002418535
Online edition [PDF Format: 461 KB / 33 pp.]

Skliarenko, Elena, and Henry Bartel. 2006. "Evaluating the Relative Efficacy of the Marketing Function in the Construction Complex of Ukraine." International Advances in Economic Research Volume 12, number 1, pages 17-32.
LC Call Number: HB1 .I467
LC Catalog Record: 96648026
Also available online in Business Source Complete , EBSCOhost Subscription resource: Online access limited to patrons onsite. (accessed June 21, 2010).

Zatolyuk, Sergiy, and Bridget Allgood. 2004. "Evaluating A Country For Offshore Outsourcing: Software Development Providers In The Ukraine." Information Systems Management volume 21, number 3, pp. 28-33.
LC Call Number: T58.6 .J65
LC Catalog Record: 91645427
Also available online in Business Source Complete via EBSCOhost Subscription resource: Online access limited to patrons onsite. (accessed June 21, 2010).

Zinovchuk, Vitaly. 2007. "Supporting Agribusiness in Ukraine: Cooperatives and Beyond." Management Theory & Studies for Rural Business & Infrastructure Development Volume 9, number 2, pp. 73-81.
LC Call NUmber:
LC Catalog Record:
Also available online in Business Source Complete via EBSCOhost. Subscription resource: Online access limited to patrons onsite. (accessed June 21, 2010).


Ukraine has experienced acute political, security, and economic challenges during the past seven years. Since the “Maidan” uprising in February 2014, the country has witnessed several momentous events, including the outbreak of conflict in eastern Ukraine. From 2014 until 2019, the Government undertook key reforms, including: carrying out significant fiscal consolidation, moving to a flexible exchange rate, reforming energy tariffs and social assistance, enhancing the transparency of public procurement, simplifying business regulations, stabilizing and restructuring the banking sector, moving forward on health and pension reforms, and establishing anti-corruption agencies. At the same time, Ukrainians continue to feel that more needs to be done to improve governance. Lack of trust in public institutions remains a fundamental concern for most people.

President Volodymyr Zelenskyy was elected in April 2019 and in July, his Servant of the People Party won the parliamentary elections. The resulting government, as well as the one re-appointed in March 2020, have both committed to an ambitious and wide-ranging reform agenda.

Although its economic impact has been less severe than expected, Ukraine remains among the countries in Europe most severely affected by the COVID-19 pandemic in health terms. By the end of 2020, Ukraine had adopted a National COVID-19 Vaccination Roadmap, and a vaccination campaign was begun in February 2021.


World Bank Investment Portfolio

No. of projects: 9 IBRD investment operations, plus one Program-for-Results (PforR)

Total Lending: US$3.19 billion, including US$148 million from the Clean Technology Fund (CTF)

The World Bank and Ukraine

Ukraine joined the World Bank in 1992. Over the 28 years of cooperation, the Bank’s commitments to the country have totaled close to US$14 billion in over 70 projects and programs.

The World Bank and the Ukrainian authorities are implementing a Country Partnership Framework (CPF) for Ukraine for FY2017–21 that supports the country’s efforts to achieve a lasting economic recovery benefiting the entire population. The ongoing CPF focuses on ensuring that markets work more effectively, establishing the necessary conditions for fiscal and financial stability, and improving service delivery for all Ukrainians.

In the past seven years, the Bank has supported the people of Ukraine through a series of Development Policy Loans (DPLs), several new investment operations, a Program-for-Results operation to support the agriculture sector, and two guarantees amounting to approximately US$6 billion aimed at improving critical public services, supporting reforms, and bolstering the private sector.

Reform measures aided by the Bank’s policy support operations have promoted good governance, transparency, and accountability in the public sector, as well as stability in the banking sector a reduction in the cost of doing business and the effective use of scarce public resources to provide quality public services at a crucial time. These operations also support the authorities in (i) continuing to reform an inefficient and inequitable housing subsidy system while protecting the poor from tariff increases by strengthening social assistance, (ii) reintegrating the conflict-affected regions, and (iii) responding to the COVID-19 pandemic.

World Bank investment projects focus on improving basic public services, such as district heating, water and sanitation, health, and social protection, as well as public infrastructure, such as the power transmission networks and national roads. The Bank is also supporting Ukraine through policy advice and technical assistance on formulating and implementing comprehensive structural reforms.

In addition to financing several ongoing private sector projects, the International Finance Corporation (IFC) is implementing a large advisory program in the country, working to simplify regulations, improve the investment climate and energy efficiency, boost the completeness of local food producers, help open new markets, and increase access to finance.


Recent Economic Developments

Although the economic impact from the COVID-19 outbreak appears to be less severe than initially anticipated—GDP declined by an estimated 4.5 percent in 2020 compared to a 6.5 percent decline in the first half of the year—the pandemic has exacted a heavy toll in terms of health and mortality and has undermined the government’s commitment to undertake critical reforms. Recent anti-corruption reforms have also suffered setbacks due to adverse court rulings in late 2020.

Economic activity recovered in the first half of 2020, supported by a number of measures to mitigate the impact of COVID-19. The full-scale lockdown was replaced by an adaptive quarantine in June 2020 that enabled many services to return to normal functioning. Domestic demand was boosted by over 10 percent (year-on-year [y-o-y]) real wage growth due to an increase in the minimum wage and a gradual recovery in economic activity. On the supply side, retail and wholesale trade grew 7.9 percent y-o-y in 2020 and made a significant positive contribution to GDP growth. The financial sector has weathered the downturn with its capital adequacy still strong. At the same time, agriculture output fell almost 12 percent due to drought and a poor harvest.

On the external side, lower energy and higher iron and grain commodity prices resulted in the most favorable terms of trade for Ukraine in the past decade. Combined with import compression, this resulted in a current account surplus of 4.4 percent in 2020. Remittances were relatively resilient, down only 5.3 percent y-o-y in 2020, while private capital inflows also recovered in the second half of the year. International reserves reached US$29.1 billion at end-December, equal to 4.7 months of next year’s imports.

Following the smaller-than-expected economic decline, fiscal revenue also performed better than anticipated. On the expenditure side, COVID-19-related outlays were less than budgeted, and a portion of the pandemic special fund was redirected to capital expenditures and to a public sector wage and pension increase. The fiscal deficit amounted to 6.2 percent of GDP compared to the initial plan of 7.6 percent.

After two years of tight monetary policy, the National Bank of Ukraine (NBU) gradually cut its key policy rate to 6 percent in June 2020, a level it has since maintained However, a more accommodative fiscal policy stance resulted in an increase in inflation expectations from 6.7 percent in August to 8 percent at year-end. The inflation rate grew from 2.5 percent on average in the first three quarters of 2020 to 6.1 percent in January 2021, which is slightly above the NBU’s target of 5+/-1 percent. This triggered a key rate increase to 6.5 percent in March 2021.

Although the COVID-19 relief measures were welcome, attention once again needs to turn to structural reforms that are required to raise medium-term growth prospects. Slower reform momentum has undermined investor confidence and delayed financing from international financial institutions as a result, significant public financing needs in 2020 have been met mostly by domestic borrowing that amounted to 10.5 percent of GDP (gross). The composition of external financing has shifted toward more expensive commercial borrowings and Eurobonds comprising 4.3 percent of GDP in total.

The poverty effects of COVID-19 are expected to be relatively muted, with the poverty rate, based on US$5.5 a day, projected to have increased by only 0.5 percentage points to 3 percent in 2020, as increases in pensions and wages helped to partially offset the decline in employment.

Ukraine’s economic recovery in 2021 is expected to be mild, given the high uncertainty associated with the vaccine rollout and the direction of economic policies to address investment bottlenecks and to safeguard macroeconomic sustainability. The GDP growth projection of 3.8 percent is underpinned by positive base effects in agriculture and the processing industry and assumes that further temporary lockdowns are possible in the first half of 2021 due to delays in vaccinations.

The 2021 budget targets a 5.4 percent deficit. Together with 10.5 percent of GDP debt amortization and 1.3 percent of GDP in arrears to the private sector, this will increase total fiscal financing needs to 17.2 percent of GDP (compared 15 percent of GDP in 2020). The increase in minimum wages will push the public wage bill to over 11 percent of GDP and create additional pressures on current account imbalances and inflation. Prudent fiscal policy is needed to address inflationary pressures in the medium term.

The poverty rate, based on the US$5.5 a day threshold, is expected to decrease to 2.5 percent in 2021, similar to the level in 2019. Accelerating the reform momentum is key to achieving faster economic growth and poverty reduction in 2022 and 2023.

1. With a GDP of $395 billion in 2012, Ukraine has only the 12th-largest economy in Europe (as measured in terms of purchasing power parity).

2. Ukraine’s economy is about one-ninth the size of Germany’s $3.45 trillion economy, which is Europe’s largest.

3. Ukraine has almost twice as much landmass as Germany, but only about 57% of Germany’s 80.4 million population.

4. With 45.6 million people, Ukraine’s per capita GDP is just $8,670 — one of the lowest income levels in all of Europe.

5. By comparison, the per capita GDP of the 18-country eurozone is $36,356 — while in the 28-country European Union it is $33,376.

6. Ukraine’s population is about seven million larger than Poland’s 38.5 million, but its economy is less than half the size of Poland’s ($821.4 billion).

7. In 1992, just after the dissolution of the Soviet Union, Ukraine’s economy (at $308.4 billion) was actually 50% larger than Poland’s ($218.8 billion).

8. This means that while Poland’s economy has nearly quadrupled in size since 1992, Ukraine’s has barely grown at all.

Source: World Bank, with additional analysis by The Globalist Research Center.

What kind of economy does Ukraine have?

Ukraine has a history of corruption and mismanagement that goes back to Soviet times.

Consider this: Ukraine's economy is smaller than it was in 1992, shortly after the collapse of the Soviet Union. At the time, Ukraine and Poland had similar-sized economies, but Poland's economy is now twice as big as Ukraine's.

The IMF estimates that the Ukrainian economy shrank 0.3% last year after barely growing in 2012.

Ukraine has a lot of coal mining, especially around the eastern city of Donetsk, as well as ageing heavy industry including shipbuilding, steel and arms. However, because many industries are so energy-inefficient, they are highly dependent on imports of Russian gas, which have been heavily subsidised.

Farming is also important: Ukraine has more arable land than any other European country and is a major producer of grain and sunflower oil. Wheat prices have risen 20% on world markets, partly because of the fear of instability in Ukraine.

And then there is the shadow economy: everything from cash-in-hand labour to corruption to illegal activities. A 2012 study by two Ukrainian academics reckons the shadow economy is equivalent to 44% of Ukraine's economic output.

In 2013, Ukraine was ranked 144 out of 177 in Transparency International's Corruption Perceptions Index.

Business and politics are deeply intertwined: Ukraine's richest man, Rinat Akhmetov was until recently an MP and a supporter of ex-President Yanukovych. His companies have received an important share of state tenders.

Ukraine’s Economic Development: A 30-Year History

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Event Sponsor


This year marks Ukraine’s 30th anniversary since its independence and transition toward a democratic system and a market economy. As part of our forthcoming book titled From "the Ukraine" to Ukraine: A Contemporary History, 1991-2021, the Kennan Institute asked several experts to examine this 30-year history of Ukraine’s economic and energy sector development. In this panel, experts who contributed to the book project discussed how Ukraine has managed the shift from a command economy to a relatively free market as well as the major achievements and shortcomings of this transition. They also examined the growth of the private sector and energy market and how this has influenced economic and political developments in Ukraine over time.

To learn more about the book and to purchase a copy, visit our collection page here.

Selected Quotes

Andrian Prokip
"The story of Ukrainian energy during the independence period is the story of swinging between populism and paternalism on the one side, and attempts to conduct reforms to make the sector efficient on the other side. It was the story of swinging between Russia and the West, the story of swinging between oligarchs’ interests. And during recent thirty years, Ukraine received many lessons in security and energy policy, but most of these lessons were based on mistakes that Ukraine did itself… The key enemies of energy reform in Ukraine are populism, paternalism, and oligarchic consensus. Ukrainian energy sector thirty years ago, in 1991, and today are completely different in terms of ownership and management but these are still very similar in terms of energies we use and patterns in energy balance, self-sufficiency, energy intensity, energy efficiency, and role of oligarchs."

"Pricing for final consumers is still unfinished business. When Ukraine became independent in 1991, there was no understanding of that since in that moment, another state, Russia, was supplying energy resources and Ukraine had to pay for it. So it took so long for consumers to understand they had to pay a real price."

Margarita Balmaceda
"The reality is that coal in places like Ukraine is still very much a part of the picture. It’s very much a part of the picture as part of the energy mix, but most importantly… it’s part of the picture because it set into motion a number of tendencies, a number of impulses, that are still very much with Ukraine today."

"The physical characteristics of natural gas, for example, as opposed to a liquid type of energy like crude oil as opposed to coal, which is a bulk product, matter tremendously for the ways in which Russia could not only deploy them against Ukraine but also matter in terms of the way in which actors within Ukraine can use them."

Mykhailo Minakov
"The new risk emerges in recent several months, we see a lot of sanctions against oligarchs and it creates certain opportunities for a non-judiciary path. There is for example a case right now with the pipeline that is being taken away from allegedly Medvedchuk or his family members and here we are entering this situation that creates the possibility for someone else who has the opportunity to take it over."

"The book that we were working on blended into something very important… This cooperation of scholars from two different academic cultures has created something very valuable, also for themselves in terms of understanding how different the same science can be, being done in the soil of the United States or Ukraine."

Ilona Sologoub
"If you look at the numbers, you will see that the private sector is quite well-developed in Ukraine and privatization has been a success with thousands of primarily state-owned enterprises or entities sold in the middle of the 1990s. Also, a lot of large enterprises were sold in the 2000s. If you look deeper at that, you will see that anything that could go wrong, actually went wrong. This refers to selling the assets to people who we now call oligarchs, so people who got access to these assets and afterwards still continue to receive government support for their operations despite the assets being private."

"You could come up with the paradox that on the one hand the state is rather weak and not present in the private sector that much, but on the other hand, if you’re close to the state, you can get a lot of preferences for your enterprise and a lot of support from the state, so it’s like a complicated relationship, but there are people who know how to benefit from that."

Inflation in Ukraine: Past, Present and Future

Inflation is always a hot topic in Ukraine – from hyperinflation in the 1990s and demand-driven price level growth in the 2000s to the present day and even the future – one of the main reforms outlined in the memorandum with the IMF is the shift towards inflation targeting.

In February 2015 the CPI inflation, already quite high, accelerated further – to 34.5% year-to-year, the highest figure in two decades. It hasn’t come as a surprise – there was a huge increase in UAH/USD exchange rate which provoked panic on the consumer market, and the population tried to spend hryvnia on anything durable “before money becomes worthless”, as buyers say.

The Dire Past

Ukraine was plagued by high inflation since its independence in 1991. Initially caused by the price liberalization during the period of widespread deficit of consumer goods, which was a common experience of all post-Soviet and Eastern European economies, it hasn’t declined in 2-3 years, like in Poland or Baltic states, but continued to accelerate. The main reasons behind this growth were the policy inconsistency (price liberalization waves interchanged with price freezes) and the attempt to keep high Soviet-style social standards in the rapidly shrinking economy without a strong (or any at the beginning) tax base, which led to excessive money emission.

“[Hyper-]inflation is always and everywhere a monetary phenomenon” – this famous Milton Friedman quote is true for Ukraine. In 1992, Ukrainian budget deficit reached 12.2% of GDP, which, in the absence of access to capital markets, was financed predominantly by issuing money, thus, inflation reached 2000%. In 1993, the situation with the budget deficit improved slightly, but the need to always ‘surprise’ economy with ever higher inflation to have an effect on the real economy resulted in price growth of over 10,000% that year. This made Ukraine the first country in the world history that had over a hundred-fold annual price level increase that wasn’t a consequence of a war.

It was impossible to make any long-term decisions with such enormous price growth, thus austerity measures were introduced, allowing to lower inflation to double digits by 1995. The consequences were severe: over 20% drop in GDP in 1994 and a similar drop in private incomes. In September 1996 the inflation lowered enough to finally introduce the local currency – UAH or hryvnia instead of ‘transitional’ coupon-karbovanets that replaced Soviet ruble in 1992 (at 1:1 exchange rate). One hundred thousand coupon-karbovanets was exchanged for one hryvnia. Since hryvnia-denominated average wage in 1996 was UAH 126 while in 1985, when the perestroika started, it was 168 Soviet rubles, for the decade (if one assumes roughly similar real wages) the cumulative price increase reached 100’000 times!

One of the reasons behind the inflation was high budget deficit. The introduction of hryvnia and fixing exchange rate at roughly 1.8 UAH/USD allowed for temporal reduction in inflation expectations, hence, the CPI growth in 1997 lowered to single digits. Budget financing shifted from the printing press of the central bank to short-term (up to one year) local borrowing. Interest rates were relatively high (in July 1998, when annual CPI growth was 6.7% the yield was over 70% per annum ), exchange rates more or less stable thus attracting both domestic and foreign capital. The situation almost completely followed the developments in the Russia at the time. Thus, when in August 1998 Russian debt pyramid fell, Ukrainian one followed the suit. Foreigners tried to extract their capitals boosting the demand for foreign currency and leading to hryvnia devaluation and a new surge of inflation. If in July 1998, just prior to the crisis, annual inflation rate was 6.7%, by December that year it exceeded 20% and stayed in 20%-30% range until 2001. The drop in inflation was caused by notably cutting budget deficit in 1999-2000, renewal of economic growth and stabilization of exchange rate around UAH/USD 5.4 in the early 2000. The main conclusion was clear – inflation is the consequence and not the reason of economic problems, which in Ukraine chiefly originated from soft monetary and fiscal policies.

One of the ways to affect inflation expectations in a highly dollarized economy akin to Ukraine is to peg exchange rate. Seeing stable figures everyday in forex kiosks, numerous in Ukrainian cities, population starts to believe that there is no reason for price growth as well. This stabilization comes at a cost – once the exchange rate is fixed, it is hard to abandon the peg, for this may cause panic among the population and business.

The acceleration of the worldwide economic growth and consequent rise of commodity prices (chiefly ferrous metals, which generated 30-35% of Ukrainian total export revenues) allowed for inflow of hard currency in 2003-2004. Positive current account balance coupled with fixed exchange rate led to growing forex reserves and parallel growth of hryvnia in circulation. Since 2005 the current account started to deteriorate but this was more than compensated with inflows of capital, which started after the Orange revolution. The NBU kept the exchange rate fixed, purchasing hard currency without any significant sterilization of such interventions.

Nominal incomes grew enormously (e.g. in 2005 they increased by 45%) pushing prices upward. Additional boost came from explosion of lending to households – private loans roughly doubled each year from 2005 to 2008. Such outstanding increase in resources led to growth of private consumption. In cases when domestic supply and imports weren’t enough, prices increased. As long as the private consumption grew rapidly, averaging 10.8% per year in real terms in 2002-2008, the population did not care much about the inflation, which during this period stayed almost constantly over 10% in annual terms. In May 2008, when the world optimism on commodity markets went into overdrive, yearly inflation in Ukraine reached 30%.

The world crisis of 2008-2009 hit Ukraine hard: GDP contracted by 14.8%, year average exchange rate changed from UAH/USD 5.27 in 2008 to 7.79 in 2009, exceeding for a short period UAH/USD 10 at the peak of the crisis. Nevertheless, inflation actually subsided slightly – from (year average) 25.3% in 2008 to 16% in 2009 and 9.4% in 2010. The situation seemed on the right track: economic growth resumed in 2010, exchange rate stabilized (and again was de facto pegged), inflation lowered to single digits.

During the crisis both the GDP and private consumption fell roughly to the same extent. However, the restoration of the latter was way faster than the former – already in 2011 it was (in constant prices) higher than in 2008, while the GDP remains lower than the pre-crisis figure to this day. In the second half of 2012 the new recession has started, which continues today. In order to fight it the government supported private consumption and decided to keep the UAH/USD exchange rate fixed. Therefore, two factors pressed prices in different directions: incomes pushed prices upward while lower economic activity pulled them down. Over 2012-2013 the recession temporary won – cumulative price growth for these 2 years was just 3% – an astonishing drop if one remembers that during the previous decade (2001-2011) the annual inflation was on average 10.3%.

The hindering effect of the recession ended together with foreign reserves which were spent for artificial stability of the exchange rate, and in 2014 depreciation of hryvnia spurred the inflation that reached 24.9% December to December.

To summarize, in different periods different factors were behind the consumer inflation in Ukraine:

Ukrainian Economic System

The Ukrainian economy is currently a mixed system. The economy pulls the strongest parts of both capitalism and socialism in order to articulate an economy that works most efficiently for the Ukraine. The mixed economic system of the Ukraine was once a communist economic system. Once the Ukraine gained independence from the Soviet Union, the Ukraine’s economy changed from a communist economic system to a mixed system. A mixed system incorporates both socialist and capitalist concepts. Capitalism is a type of economic system where the government plays little to no role at all. The factors of production are owned by businessmen and investors in a capitalist economy. Socialism is a type of economic system where the government does play a significant role in the economy. In a mixed system the factors of production are owned by individuals, but the government does have some level of involvement. The mixed system economy in the Ukraine consist of a market economy with regulations and social programs. The market economy in the Ukraine allows individuals to own and develop private businesses without the government limiting them. The government however does place healthy regulations on businesses in order to protect consumers. The Ukraine also has many social programs such as social and survivor pension. These programs use the economy to benefit the citizens of the Ukraine and socially aide them. This is a socialistic idea, but it is mixed with the ideas of a capitalist economy. A major ramification of the mixed economic system within the Ukraine is trade. Trade is 108% of the Ukrainian GDP, and it is largely important to the country collectively. Prior to the independence of the Ukraine, the government in the Ukraine owned factories within the country. The communist idea of the government owning factors of production led to the failure of many factories causing the economic system to transform. The goal of the Ukrainian economy today appears to be to allow businesses and the economy to flourish while still protecting individuals socially within the country. The Ukrainian economy has had moments of weakness, but it has so much potential for growth. The landscape of the Ukraine is filled with natural resources and power resources that have the potential to drive the economy forward. The Ukraine has also been taking steps to receive more foreign investors. Foreign investors could potentially benefit the economy as well. The mixed economic system in the Ukraine appears to be a strong balance between capitalism and socialism. The Ukraine has built an economy around its strengths, and the Ukrainian economy in my opinion will continue to grow under a mixed system.

Economic Growth

After attaining independence in 1991, Ukraine undertook inconsistent reforms toward becoming an efficient market-based economy. USAID supports a competitive economy in Ukraine in which small and medium-size businesses are free to achieve their potential. With USAID support, the Government of Ukraine recently achieved several milestones, including introducing an electronic disclosure and reporting system for publicly listed companies, creating institutions to facilitate transparent and efficient asset trading, and developing a bond market.

USAID works with Ukrainians to build a strong financial sector in Ukraine regulated by politically and financially independent entities, supported by industry best practices, integrated with international standards, and trusted by Ukraine’s citizens and the investor community.

USAID programs improve the business climate at the national and local levels to encourage domestic and foreign trade and investment. By streamlining laws and regulations that contribute to the cost of doing business, USAID fosters a competitive Ukrainian economy.

Current Programs:


Financial Sector Transformation Project (FST)
Implementer: DAI Global LLC
Project Period: October 28, 2016 August 27, 2021

The Financial Sector Transformation Project (FST) is a four-year program whose primary focus is to develop and improve financial service delivery to meet the needs of citizens and businesses of all sizes. Working in partnership with the Government of Ukraine and its financial sector regulators, financial industry associations, civil society organizations and the private sector, FST seeks to:

  • Increase public confidence in and understanding and use of the banking system
  • Support transformation of the financial sector legal and regulatory environment
  • Increase access to finance for small and medium-sized enterprises
  • Improve financial inclusion and expand digital finance solutions and
  • Support a balanced and sustainable pension system.

Project activities include technical assistance, legal and regulatory drafting, educational tours, training, and some limited procurement of information and technology systems.

Business Investments and Loans
Implementer: Western NIS Enterprise Fund/Horizon Capital
Project Period: September 21, 1994 – December 31, 2023

USAID created the Western NIS Enterprise Fund (WNISEF), a regional private equity fund for Ukraine and Moldova, in 1994, capitalizing it with $150 million, and for two decades WNISEF invested in small and medium-sized companies in the region. In 2014, USAID re-directed the remaining funds toward promoting policies and practices that support private sector development. WNISEF now focuses on developing economic leadership and local economies and building social investments and export promotion.


Competitive Economy Program
Implementer: Chemonics Int.
Project Period: October 16, 2018 – October 15, 2023

USAID’s Competitive Economy Program (CEP) advances a strong, diverse, and open Ukrainian economy by supporting business startups and small and medium-sized enterprises (SMEs) to become more competitive in domestic and international markets. CEP’s principal objectives are: strengthening the business enabling environment, developing new and innovative industries and firms, and promoting export and trade.

Economic Resilience Activity
Implementer: DAI Global
Project Period: August 27, 2018 – August 26, 2023

The conflict in eastern Ukraine has disrupted critical market linkages, catalyzed the economic decline of previously dominant industries, and caused massive population disruption. ERA will support entrepreneurs and small- and medium-sized businesses in competitive sectors to mitigate the impacts of the conflict and reduce the region's reliance on oligarch-backed big businesses and trade with Russia. In the short-term, ERA will work with conflict-affected and vulnerable populations to help them rebuild their economic livelihoods. In the medium-term, ERA will work in select value chains and with innovative businesses to help them expand and find new markets. ERA’s long-term goal is to build confidence in the future of the eastern Ukrainian economy by stimulating entrepreneurship and investment in the region. ERA’s primary focus is on providing support to Luhansk and Donetsk Oblasts, while also working to strengthen economic linkages between these two oblasts and the rest of the country.

Analytical Services in Support of the Economic Resilience Activity
Implementer: Resonance Global
Project Period: August 20, 2018 – August 19, 2023

The Analytical Services in Support of the Economic Resilience Activity supports the implementation of USAID’s Economic Resilience Activity (ERA) by providing third-party monitoring and evaluation services to ensure that ERA’s efforts are having an impact. This activity supports USAID’s commitment to data-driven, evidence-based development and maximizing the impact of U.S. taxpayer assistance.

Competitive Markets Program(CMP)
Implementer: U.S. Federal Trade Commission (FTC)
Project Period: December 4, 2019 – December 5, 2024

The Competitive Markets Program promotes development of an effective competition policy and a competitive business environment. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) provide technical assistance primarily by deploying advisors to the Anti-Monopoly Committee. CMP experts focus on three areas: 1) strengthening the capacity of the Anti-Monopoly Committee of Ukraine (AMCU) to apply Ukraine’s competition legislation in a way that supports free markets 2) supporting the reform of Ukrainian institutions, legislation, and policies necessary to the functioning of a competitive market and, 3) supporting USAID and other US Government programs in identifying key areas in which anti-competitive conduct is occurring and helping these programs find broad-based solutions to combat anti-competitive conduct.

The State-Owned Enterprises Rapid Response Activity (SOERR)
USAID/Ukraine’s Buy-In Component of the USAID Economic Development, Governance, and Enterprise Growth (EDGE)
Implementer: International Development Group, LLC (IDG)
Project Period: February 1, 2020 – May 31, 2021

The State-Owned Enterprises Rapid Response Activity (SOERR) activity consists of two complementary tasks: (1) providing professional support to the reform and privatization of state-owned enterprises and (2) supporting reforms in the real estate sector. The activity has USAID-supported advisors working in specific government institutions -- the State Property Fund of Ukraine, the Ministry of Economic Development, Trade and Agriculture, and ProZorro.Sales -- to provide on the spot consultation and training. SOERR is implemented through a broader USAID initiative, entitled the Economic Development, Governance, and Enterprise Growth (EDGE) activity.


Cybersecurity for Critical Infrastructure in Ukraine Activity
Implementer: DAI Global
Project Period: May 18, 2020 – September 17, 2024

USAID’s Cybersecurity for Critical Infrastructure in Ukraine Activity strengthens the resilience of Ukraine’s critical infrastructure to withstand cyberattacks by establishing trusted collaboration between key cybersecurity stakeholders in government, the private sector, academia, and civil society. The Activity includes three mutually-reinforcing components: 1) strengthening the cybersecurity enabling environment 2) developing Ukraine’s cybersecurity workforce and, 3) building a resilient cybersecurity industry.


Ukraine is a well-promising developing country that hopes to become a member of the European Union in the future. Ukraine has made a long way from being a part of USSR to its independence and Euro integration.

Recent years could be defined as the years of radical changes in Ukraine. After the Euromaidan revolution, Ukraine has joined Association Agreement and the Free Trade Agreement with the European Union. Ukraine is in active negotiation with Schengen countries for implementation of a visa-free regime for Ukrainian people. This cooperation between the UA-EU is nowadays priority for Ukraine and definitely a promising path for the young economy.

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