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All about Ukrainian economy and exports (key data, stakeholders, trends) All about Ukrainian economy and exports

Key data and indicators.
Population: 48 million people
GDP (PPP): $303.4 billion. $6,394 per capita
Structure of Ukrainian economy: 51% services, 37% industry and production, 12% agriculture.
Type of Ukrainian economy: export-oriented
Inflation (CPI): 9.0%
FDI (net inflow): $1.7 billion
Exports: $52 billion. Primarily ferrous and nonferrous metals, steel, pipes, chemicals, machinery, transport equipment, food, drinks and agricultural products.
Imports: $56 billion. Primarily energy resources, machinery and equipment, chemicals.

Overview of Ukrainian economy and exports. In short period of time (from gaining independence in 1991), Ukraine has managed to demonstrate that it can eliminate its inherited nuclear weapons, create new governmental institutions, considerably curb inflation and corruption, introduce a new currency (the "Hryvna", UAH), take its niche in global exports, and gain respect of the international community.

Export and business restrictions have been significantly reduced following independence from the Soviet Union, with core export categories including ferrous and non-ferrous metals, steel products and steel structures; chemical products (including fertilizers; plastics and rubber); agricultural products and food (mainly grains, cereals; food processing and packaging); energy sector (Ukraine is a net exporter of electrical power, oil & gas transit from Russia to the EU); engineering goods; various types of machinery and equipment (including industrial equipment, hi-tech, aerospace); health care products (including pharmaceuticals, medical equipment); informatics (including computer hardware, telecommunications, software, information services); tourism services (including hotel/restaurant, resort development); building materials; textiles and various raw materials.

Last year Ukraine obtained market economy status and is to join the WTO. The country is an important emerging market at the crossroads of Eastern Europe, Russia, Central Asia, and the Middle East. Ukraine benefits from a consumer market of slightly less than 50 million people, and enjoys an opportune geographical location, a favourable climate, a rich natural resources, a highly educated labour force, a well-developed transport infrastructure and state-of-the-art scientific research and development base.

Ukraine is currently experiencing a growth in GDP of approximately 12% per year. This year Ukrainian economy grew 7 times comparing to last year. But nowadays the structure of domestic economy is still the same as 5 or 10 years ago. The drivers of growth are high global demand for Ukrainian export products as well as increased demand for the same products at the domestic market. According to statistics export rose 12% and consumption of goods and services by Ukrainian physical and legal persons - 14%.

According to official data of the State Statistics Committee, total foreign investments in Ukraine were valued at over US$ 10 billion. The United States accounts for 22% of the total and Germany is second at 19%. Within the new and challenging Ukrainian commercial environment, about 50.000 U.S., Canadian and European companies are currently active in the market, either as investors, exporters or importers.

Ordinary Ukrainians feel consequences of economic boom of their country, because their profits rose in average up to 20%, which is twice as growth of Ukrainian economy approx. 9%. Main factors of raised profits were increase in labour productivity, minimal wages and salaries of civil servants. Growth of profits of population at the same time stimulates consumption, which is 2 times higher than growth of GDP. Now domestic consumption is playing one of the leading roles in economy structure and in the coming years it will be growing more.

Major part of these profits and salaries supported importers, because mostly imported goods were purchased, like cars, hi-tech equipment, household items, etc. Thus, this year import rose 26% and constitutes 41% of total consumption. This also led to negative annual balance of trade, which is more than - $4 billion!

Other economy stimulators were banking credits. Notwithstanding that the average interest rate was about 16% per annum, the volumes of financing and lending to physical and legal persons this year rose 2-3 times comparing to previous year. Commercial credits fostered purchase of long-term consumption goods, real estate and cars.


Industry and production. The most technologically advanced and competitive fields of Ukrainian economy still remain steel and pipes, confectionary, alcoholic beverages, agricultural products, equipment and machinery.

Unfortunately, due to lack of funds Ukraine mostly produces/exports raw materials or products with small added value. After a deep economic crisis caused by collapse of the Soviet Union, only in 2006 Ukrainian industry and production reached the level of 1991 year. But a share of high technology accounts only 5% comparing to 20% showed in 1991.

Dependency of Ukrainian economy on world market trends is especially vivid in the field of steel, iron and metal production. When in 2006 the world market demand for steel, iron and metal products substantially rose, Ukrainian steel-makers showed 9% growth of production. Such improvements not only had positive effect on Ukrainian GDP, but also boosted investment in modernization of production and technical upgrading of plants, which helped to decrease costs, start up new production lines and save more energy (while Russia is constantly increasing price for energy resources).

If mining and steel complex growth was stimulated by increased demand for steel and iron by overseas markets, such industries as machine-building (growth 12%) and food processing (10% growth) were fostered by domestic demand.


Latest economic trends. A shadow Ukrainian economy is continually decreasing and among big producers accounts to around 5%. This years net profit of top-500 Ukrainian companies rose in average by 50%.

A slight decrease in FMCG sector, which continues for a few years, was observed. For comparison, only three years ago this sector showed 15-20% growth per annum. The reasons for such decrease are gradual saturation of the market and increased competition on the part of foreign importers.

Another continued decline showed Ukrainian textiles production and light industry as a whole. The reason is the same as all over the globe Chinese and Turkish below production-cost dumped imports.

Merger and acquisition tendencies didnt change. As a few years in a row many Ukrainian companies were acquired by foreign giants. The acquired companies included not only stagnating plants, but many leading producers, e.g. Kryvy Rih steel mill bought by ArcelorMittal AG. The most active purchases were in the financial and banking sector due to huge increase in credit popularity. This year about 5-7 leading Ukrainian banks were acquired by overseas rivals.


Level of modernization and technical upgrading. A negative trend of ill-funding of R&D, modernization, innovation and energy-saving technologies is still exists. A lions share of Ukrainian exports is becoming outdated and in the years to come may loose its competitiveness at all.

Our research shows that within last 5 years a share of Ukrainian companies that implemented innovative techniques and up-to-the-minute equipment or invested in R&D has decreased from 18% to 11,2%. Out of $1,5 billion allocated to modernization by private and public-owned companies, only 6th part was directed to research and development, all the rest - to purchase of foreign up-to-date equipment. E.g. expenses of Boeing for research and development were at the level of $3+ billion.

Poor-funding of science and innovation by private sector and state is the main reason why Ukrainian production and exports remain unchanged and unrefreshed for more than 15 years. Even now industry and production structure of Ukrainian economy is very close to post-war mainly oriented on raw material production and heavy machine building.

Only increased investment by producers in such fields as mining and steel complex as well as machine-building industry due to high demand for their products helped these sectors to prevent bankruptcy predicted by experts and economic recession in general. All Ukrainian producers in other sectors of economy are to follow example of their colleagues, if they want to stay afloat.

Conclusion. Today Ukraine is one of the worlds competitive & emerging markets and experts believe that in years to come its economy will be among the strongest in the whole CIS and Eastern Europe region. Contrary to many countries where SMEs are a backbone of economy, big companies and producers are drivers of rapid Ukrainian economic development.
If you want substantially reduce your business costs and be ahead of your competitors, invest in Ukraine. When you just starting up your business or planning to run any investment project in Ukraine, your company needs a partner, who possesses an excellent professional qualification as well as local knowledge and connections. Marketplace UkrRos LLC provides professional consultancy and support services to companies entering the Ukrainian market. Decades of versatile and in-depth experience in Ukrainian business combined with top professional competence makes us the undisputable leader in this field. For more information, please go to www.kpl.net.ua.

This article contains data of the Ministry of Economy of Ukraine, State Statistics Committee, international governmental and private entities.

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