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PUAF781-F2007-SP-Scoville

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					 Ukraine




   Kelly Scoville
    PUAF 781
November 26, 2007
                      Key Facts
   Population: 46,299,862
   Unemployment Rate: 2.7%
    (officially registered)
   Current Account Balance:
    -$1.617 billion
   GDP (PPP): $364.3 billion
   GDP real growth rate:
    7.1% (2006 estimate)
   GDP composition by
    sector:
    • Agriculture: 10.2%
    • Industry: 32.9%
    • Services: 57%
Annual Real GDP Growth (%)
                   National Bank of Ukraine:
                    Official Exchange Rate
   Digital code   Letter code   Number of units   Currency                 Official exchange
   036            AUD           100               Australian dollars       440.7440
   031            AZM           100               Azerbaijanian manat      595.7296
   974            BYR           10                Belarussian ruble        0.0235
   124            CAD           100               Canadian dollar          511.6684
   203            CZK           100               Czech korunas            27.9478
   208            DKK           100               Danish kroner            100.3145
   826            GBP           100               English pound sterling   1038.3263
   233            EEK           100               Estonian kroons          47.7966
   978            EUR           100               EURO                     747.8545
   348            HUF           1000              Hungarian forint         29.0643
   352            ISK           100               Iceland kronas           8.0466
   392            JPY           1000              Japanese yens            46.7789
   398            KZT           100               Kazakh tenges            4.1954
   428            LVL           100               Latvian lat              1070.3514
   440            LTL           100               Lithuanian lit           216.5936
   498            MDL           100               Moldavian lei            44.7818
   578            NOK           100               Norwegian kroner         92.9185
   985            PLN           100               Polish zlotys            202.5882
   643            RUB           10                Russian ruble            2.0812
   960            XDR           100               SDR                      804.7693
   702            SGD           100               Singaporean dollar       350.2175
   703            SKK           100               Slovak korunas           22.2781
   752            SEK           100               Swedish crowns           80.2522
   756            CHF           100               Swiss franc              458.1880
   792            TRL           100               Turkish lire             419.7892
   795            TMM           10000             Turkmen manat            9.7115
   840            USD           100               US dollar                505.0000
   860            UZS           100               Uzbekistan sum           0.3933
   156            CNY           100               Yuan renminbi (China)    68.1882
               Political Issues
   Formerly part of the Soviet Union; independence
    ratified in December 1991
   Liberalized most prices and erected legal
    framework for privatization
   Widespread resistance to reform at first
   Officially a democratic republic, though there
    have been problems: rigged 2004 presidential
    election
   Elusive domestic political stability
         Economy in the 1990s
   Ukraine moved from planned economy to market
    economy with collapse of Soviet system.
   Painful transition for many; led to widespread
    poverty.
   Negative GDP growth throughout the 90s.
   Government subsidized government-owned
    industries and agriculture.
   Loose monetary policy led to massive
    hyperinflation in early 90s.
   Prices stabilized after introduction of new
    currency, hyrvnia, in 1996.
    Current Economic Environment
   Emerging free market
   Imports most energy supplies, especially oil and
    natural gas, mostly from Russia; exports
    metals, machinery and transport equipment, food
   GDP growth positive, but economic growth
    slowed recently as world energy prices rose and
    metal prices fell.
   The hyrvnia is essentially pegged to the US
    dollar.
         Key Issues: The Good
   GDP growth has been positive in recent years
   Some reforms and laws have been enacted with
    the goal of joining the WTO
   Heightened foreign direct investment
   Continued growth of services
   Entry of small and medium enterprises in market
   Has made strides to diversify to new markets
    (Asia, EU) rather than depend on Russia
           Key Issues: The Bad
   Dependence on Russia for energy supplies makes
    economy vulnerable to external shocks
    (especially energy shocks)
   Lack of structural reform and privatization efforts
    (especially land)
   Corruption and political instability
   Poor corporate governance and weak
    enforcement of contracts
   WTO membership question
   Appreciation of hyrvnia
           Key Issues: The Bad
   De facto peg to US$ too difficult and costly to
    maintain
   Inflation is much more volatile and well above
    that of more advanced transition economies
   GDP growth is forecast to slow in 2008-2009
   Current account deficit expected to widen
    Issue Analysis: Goods Market
   Current account
    deficit: export to
    import ratio declines
    and reduces
    expenditure
   Decline in investment
    further reduces
    expenditure
   Leads to serious
    decline in output
    Issue Analysis: Money/FOREX Market
   Governor of Central
    Bank considering
    allowing currency to
    appreciate further
   Could do so by
    contracting money
    supply
   Expectation of
    appreciation lowers
    interest parity
    condition and further
    appreciates currency
            Recommendations
   Quicken pace and scope of structural reforms and
    privatization efforts
   Make further strides to diversify to new markets
   Enact modern corporate governance legislation
    and create market-supporting institutions
   Allow hryvnia to float more freely
   Fight corruption
   Reduce dependence on steel exports
Questions?
                            References
   Krugman, Paul and Maurice Obstfeld. International Economics. Pearson:
    Boston, 2006.
   CIA-The World Factbook. Ukraine. https://www.cia.gov/library/publications/the-
    world-factbook/geos/up.html
   International Monetary Fund. Ukraine.
    http://www.imf.org/external/country/UKR/index.htm
   World Bank. Ukraine. http://www.worldbank.org/
   National Bank of Ukraine. http://bank.gov.ua/Engl/default.htm
   National Bank of Ukraine official exhange rate.
    http://bank.gov.ua/kurs/engl/last_kurs1.htm
   Ukraine: Selected Issues. International Monetary Fund.
    http://www.imf.org/external/pubs/ft/scr/2007/cr0747.pdf
   Modern Economic Potential of Ukraine. National Exhibition of Ukraine in the USA.
    http://www.ukrdzi.com/usa/uapotential/21.htm
   The Economist. Country Briefings: Ukraine.
    http://www.economist.com/countries/Ukraine/
   The Economist. “Oranges and Lemons.” 4 October 2007.
   The Economist. “Viktor v. Viktor: Ukraine’s Political Crisis.” 12 April 2007.

				
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