Led by agriculture, Ukraine experiences signs of strong economic growth (08/26/01)

Led by agriculture, Ukraine experiences signs of strong economic growth

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine's economy continued to grow robustly during the first seven months of this year, according to government figures released in the last week. The report comes just as the agricultural sector announced a remarkably good grain harvest for the year as well, adding to growing optimism that the country has finally turned the corner on more than a decade of stark economic decline.

The State Statistics Committee of Ukraine announced on August 14 that the country's real gross domestic product (GDP) grew by a whopping 10.5 percent from January through June of this year when compared to the previous year. Then in July it went up 17.4 percent compared to the same period in 2000. Last year the Ukrainian economy grew for the first time in ten years of independence, rising by 5.8 percent.

The committee report noted that the record growth in GDP in the last seven months was led by strong increases in gross production in the farm and timber industry, which expanded by 24.6 percent, followed by the manufacturing sector at 21.9 percent, and wholesale and retail trade at 14.3 percent.

The numbers look even better considering that inflation in Ukraine has remained dormant for all practical purposes when compared to the double-digit figures of the last years. Thus far in 2001 it is a negligible 3.5 percent. In July Ukraine even experienced deflation - probably for the first time in its short history - with prices decreasing by 1.7 percent. In 1992-1993 the country experienced some of the worst inflation in the world, reaching four figure levels.

The lowest six-month figure for inflation in Ukraine was 3 percent achieved in the January-June time frame of 1997. However, that was followed by the August meltdown of the Russian economy, which caused inflation to reach 20 percent by the end of the year. Last year's inflation figure was 25.8 percent.

The strong growth this year has been led by the agricultural sector. On August 14 the Ukrainian government increased its optimistic grain harvest projections by 2 million tons to 37 million. Ukrainian farmers have already harvested a combined total of 35 million tons of grain, up by nearly 18 million tons over last year.

Ukraine's Agricultural Minister Ivan Kyrylenko said on August 9 that the country's farmers would export 5-6 million tons of the 2001 total, mostly to countries of the European Union in the form of grain feed. Ukraine has export contracts for grain feed for this year with Israel, Greece, Turkey, Spain, Italy, Georgia and Saudi Arabia.

In a day of great news for the Ukrainian economy, the National Bank of Ukraine sounded another positive note on August 14 when it announced that its net international reserves (obligations versus reserves) finally moved into the black in June and reached $372.2 million on August 10. Meanwhile, its overall foreign reserves hit $2.2 billion, the highest amount since February 1998.

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