Ukraine - Economy

Ukraine was central to the Soviet agricultural and industrial system. The rich agricultural land of this region (commonly called the "breadbasket" of the former Soviet Union) provided 46% of Soviet agricultural output in the 1980s, and also accounted for 25% of the USSR's coal production. Ukraine's economic base is dominated by industry, which accounts for over 40% of GDP (2000 est.). However, agriculture continues to play a major role in the economy, representing about 13% of GDP.

Real GDP declined 3% in 1990, 11% in 1991, and an estimated 15% in 1992. Recovery in 1997 was cut short by the effects of the Russian financial crisis of 1998. Real GDP fell -1.7% in 1998 and -0.2% in 1999. However, the economy has registered strong positive growth since 2000—5.9% in 2000; 9.1% in 2001, and a projected 5% in 2002—despite the global slowdown beginning in 2001. Official unemployment since 1999 has averaged about 4.2%. Inflation, averaging 21.67% 1998 to 2000, was reduced to a single digit rate (6%) in 2001, and is projected at 9.8% for 2002. Although still high, this is a marked improvement over the 400% hyperinflation that plagued the country in 1994. In response to the hyperinflation, the government introduced a new currency and instituted mass privatization in 1995. Yet the country remained plagued by a slow economic decline. A new civil code adopted by parliament in 1997 was expected to stabilize the country's business climate. Economic recovery beginning in 2000 is attributable to a number of factors: double-digit growth in industrial output in 2001; a good grain harvest resulting from good weather and reduced governmental controls; improved export competitiveness from the depreciation of the currency in 1998–99; the clearance of many wage and pension arrears; increased domestic demand as a result of wage and pension increases granted in 2000 and 2001; considerable idle capacity; and the expansion of export markets.