Ukraine's GDP grows by 4.1 percent (12/29/02)

Ukraine's GDP grows by 4.1 percent

by Andrew Nynka

PARSIPPANY, N.J. - Ukraine's gross domestic product grew by 4.1 percent in January-October of this year, as compared with the same period of the previous year, Ukraine's State Statistics Committee announced in a report released on November 21.

In 2000, Ukraine's GDP grew by 5.8 percent and marked the first time the country registered economic growth since it gained independence in 1991. After a high of 9.1 percent growth in 2001 and the ouster of a reform minded government that year, it appears that the economy has begun to slow, although the current government has pledged to continue reforms to strengthen the economy.

On another positive note, the report also showed that foreign investments in Ukraine increased by 28.6 percent, up to $680.9 million, over January-September, as compared to the same period last year. The news appears to be a pleasant surprise for Ukraine because weak tax and intellectual property laws have traditionally hampered the country's efforts to attract foreign investment.

Additionally, many foreign companies saw business ventures into Ukraine as a major risk and, although the country is said to have great business potential, Ukraine experienced little to no foreign investment. However, the latest investment numbers could signal that foreign capital is starting to take a serious look at the possibility of investing in Ukrainian markets.

Also, the country's export surplus grew over January-September by $280 million or 12 percent, up to $2.65 billion, from the same period last year.

However, $250 million in loans from the World Bank and 92 million euros ($91.7 million) in loans from the European Union were suspended, due to the turbulent political situation in Ukraine, this means the country will have to secure additional Eurobonds over the next several years to overcome many of its foreign debt payments, said Serhiy Manokha, deputy state secretary in Ukraine's Finance Ministry, according to Interfax-Ukraine.

In other economic news, the European Bank for Reconstruction and Development said that it would remain a catalyst for investors - both foreign and domestic - in Ukraine, according to the EBRD's latest country strategy, released on September 27.

The EBRD, which to date has invested 1.4 billion euros through 57 projects, said the organization will try to spur investment in Ukraine by continuing its support for private business, local and foreign-sponsored, while pursuing "selective commercialization of the public sector," in accordance with to the new strategy approved by the EBRD board of directors.

Besides the financial and energy sectors, the new strategy envisages active involvement in road, rail and air transportation projects, as well as increasing efforts to further the process of privatization in Ukraine. The EBRD, one of the largest investors in Ukraine, will also continue to invest in the municipal services sector. The document also outlines the EBRD's efforts to encourage Ukrainian municipalities to introduce administrative and tariff reforms with the ultimate goal of providing better services to their citizens.

The EBRD said it would also play an active role in other Ukrainian sectors, particularly agribusiness. The statement said it intends to introduce seasonal financing for farmers and grain traders through various credits.

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