Rapport CIA3

ECONOMY

Economy - overview: After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other regions of the former USSR. Ukraine depends on imports of energy, especially natural gas, to meet some 85% of its annual energy requirements. Shortly after independence in December 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Loose monetary policies pushed inflation to hyperinflationary levels in late 1993. Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Ukrainian government officials have taken some steps to reform the country's Byzantine tax code, such as the implementation of lower tax rates aimed at bringing more economic activity out of Ukraine's large shadow economy, but more improvements are needed, including closing tax loopholes and eliminating tax privileges and exemptions. Reforms in the more politically sensitive areas of structural reform and land privatization are still lagging. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the pace and scope of reforms. Growth was 4.4% in 2005, underpinned by strong domestic demand, and solid consumer and investor confidence. The current account surplus reached a record high in 2005.

GDP (purchasing power parity): $321.2 billion (2005 est.)

GDP (official exchange rate): $67.65 billion (2005 est.)

GDP - real growth rate: 4.4% (2005 est.)

GDP - composition by sector: agriculture: 18.5% industry: 44.7% services: 36.8% (2005 est.)

Unemployment rate: 3.8% officially registered; large number of unregistered or underemployed workers; the International Labor Organization calculates that Ukraine's real unemployment level is around 9-10 percent (2005 est.)

Population below poverty line: 29% (2003 est.)

Inflation rate (consumer prices): 13.9% (2005 est.)

Budget: revenues: $22.95 billion expenditures: $24.48 billion, including capital expenditures of NA; note - these estimates probably do not include the government's doubling of pensions in September of 2004 (2005 est.)

Public debt: 20.5% of GDP (2005 est.)

Agriculture - products: grain, sugar beets, sunflower seeds, vegetables; beef, milk

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

Exports - partners: Russia 18%, Germany 5.8%, Turkey 5.7%, Italy 5%, US 4.6% (2004)

Communications

Telephones - mobile cellular: 4.2 million (2002)

Telephone system: general assessment: Ukraine's telecommunication development plan, running through 2005, emphasizes improving domestic trunk lines, international connections, and the mobile cellular system
domestic: at independence in December 1991, Ukraine inherited a telephone system that was antiquated, inefficient, and in disrepair; more than 3.5 million applications for telephones could not be satisfied; telephone density is now rising slowly and the domestic trunk system is being improved; the mobile cellular telephone system is expanding at a high rate
international: country code - 380; two new domestic trunk lines are a part of the fiber-optic Trans-Asia-Europe (TAE) system and three Ukrainian links have been installed in the fiber-optic Trans-European Lines (TEL) project that connects 18 countries; additional international service is provided by the Italy-Turkey-Ukraine-Russia (ITUR) fiber-optic submarine cable and by earth stations in the Intelsat, Inmarsat, and Intersputnik satellite systems

Radio broadcast stations: AM 134, FM 289, shortwave 4 (1998)

Television broadcast stations: at least 33 (plus 21 repeaters that relay broadcasts from Russia) (1997)

Internet users: 3.8 million (2003)