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Ukraine Investment Climate


Ukraine
Despite periods of political instability surrounding elections, Ukraine made good progress on structural reforms in 2006. The economy grew 6.6% in 2006, an improvement over the sluggish performance of the previous year, and benefited from robust domestic consumption and recovery of foreign demand for metals and chemicals. An attractive risk-return potential continued to draw international investors to Ukraine. Economists project the Ukrainian economy will continue to grow 5% annually for the next 5 years.

Economic Achievements: Stable Growth Continues

  • Ukraine's GDP grew 6.6% in 2006, compared to 2.6% in 2005. The economy proved stable despite the shock of rising prices for imported gas at the start of the year.
  • Inflation was at 12%.
  • The US granted Ukraine market economy status.
  • The US Senate revoked the Jackson-Vanik Amendment for Ukraine.
  • All necessary bills for WTO accession were passed by the Parliament of Ukraine.
  • National Bank's international reserves increased by 14.75%.
  • The nominal salary of Ukrainian citizens increased by 29.2%.
  • Consumer spending continued its increase, close to 33%, similar to 2005 levels.

Socio-Political Situation

  • March 2006 Parliamentary elections were judged by international observers to be free and fair.
  • Ukraine received a better ranking in Transparency International's Corruption Perception Index, moving up to 107th position out of 159 countries.
  • Relations with Russia improved.
  • Civil and political freedoms are developing.
  • Independent press and no government censorship.

FDI Increasing

  • FDI from the US, UK, Germany, the Netherlands and Russia increased.
  • Since independence in 1991, Ukraine has attracted $19.4 billion in FDI.
  • The financial services sector has been the biggest FDI magnet in 2006, while the consumer market has also attracted strong interest.
  • Traditionally strong industry sectors include food processing, machine engineering, transport and telecoms.
  • FDI per capita is $419.

Indicators 2001 2002 2003 2004 2005 2006
Real GDP Growth, % 9.2 5.2 9.6 12.1 2.6 6.6
Average Inflation, % 6.1 -0.6 8.2 12.3 10.3 11.6
Exchange Rate, USD 5.37 5.33 5.33 5.32 5.05 5.05
Current Account Balance, % of GDP 3.7 7.5 5.8 10.5 3.1 -1.1
Foreign Debt Stock (USD billions) 20.4 21.6 23.8 30.6 38.8 44.9
FDI (USD billions, net) 0.7 0.7 1.4 1.7 7.3 4.5

Sources: ICPS, NBU
Ukraine Investment Climate, 2005


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© Copyright 2005-2006, Horizon Capital Management Team. All rights reserved.
* This material does not constitute an offer to sell or a solicitation of an offer to buy an interest in the fund. This material is not, and under no circumstances is it to be construed as, a prospectus or advertisement.