Ukraine's economy continues to exhibit strong growth in first half of 2003 (07/27/03)

Ukraine's economy continues to exhibit strong growth in first half of 2003

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Mid-year economic figures in Ukraine continued to show strong and expanding growth for the country with the gross domestic product (GDP) developing at a robust 7.5 percent for the first six months of the year.

Numbers released by the State Statistics Committee on July 17 showed an 8.2 percent expansion in the Ukrainian economy for June following an 8.3 percent growth in May. The construction sector led the continued surge in economic growth by expanding at a rate of 21.8 percent, followed by light industry at 13.3 percent, utilities at 10.5 percent, transport at 9.2 percent and wholesale and retail trade at 8.3 percent.

This is the fourth consecutive year that the Ukrainian GDP has shown economic growth, and it is nearly double the 4.4 percent figure recorded last year.

Salaries also grew, up by 15 percent since the beginning of the year, while inflation remained under control at an annual average of 6 to 7 percent. For the first six months of 2003 Ukraine recorded a restrained 4.6 percent inflation, with a minuscule 0.1 rise in June. Meanwhile, the National Bank of Ukraine reported that hard currency levels had exceeded $6 billion - a new record for the country.

During a farewell speech on July 21 (see story on page 1), U.S. Ambassador Carlos Pascual applauded the strong growth of the Ukrainian economy over the last three and a half years.

"If I had told anybody in Washington that Ukraine would have three consecutive years of growth, they would have said that I was crazy," said an unusually glib Mr. Pascual.

The U.S. envoy said the continued strong performance in the previously dormant economy was due to strong grassroots economic initiative; macroeconomic stability over the last several years; an end to an extensive system of barter that had previously ruled the economy; timely payment of utility bills by corporations as well as wages and salaries; and stirring in the agricultural sector after the reform initiative of 1999.

"People are spending money and businesses are providing services ... the market place is beginning to work," explained Ambassador Pascual.

He noted, however, that in addition to the still unfinished tax reform effort, the most glaring weakness in the economy was the continued lack of substantial foreign investment, which he said had reached merely $5.3 billion in 12 years, with U.S. investors leading the way at $900 million.

Ambassador Pascual blamed the dearth of investor interest in the country on the lack of predictability and transparency in Ukraine's court system and the instability of legislation.

During his monthly briefing to reporters on July 15, a couple of days before the economic figures were released, President Leonid Kuchma also noted that while the numbers were "dynamic" some problems still exist. He said the economy was weighed too heavily on imports, which accounted for 29 percent of total economic activity. Mr. Kuchma also identified an unevenness in economic growth by region and noted that at least one region of the country, the Poltava Oblast, had seen its economy shrink thus far this year.

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