Dynamic growth of economy reported for 2003 in Ukraine (01/18/04)

Dynamic growth of economy reported for 2003 in Ukraine

by Roman Woronowycz
Kyiv Press Bureau

KYIV - A dynamic expansion of Ukraine's economy continued in 2003, with the latest government figures showing that GDP (gross domestic product) growth in the last year rose by 8 percent, reported Prime Minister Viktor Yanukovych on January 12.

"We had solid economic growth in 2003," said Mr. Yanukovych.

The country's industrial sector stoked an unprecedented fourth continuous year of strong economic growth by exceeding expectations and increasing production by 15.8 percent. At the beginning of 2003 government officials had forecast growth in the industrial sector at no better than 7 percent for the year.

Since the country's economy heated up in 2000, industrial production has expanded by 33 percent. It stimulated the economic expansion of 5.9 percent, 9.1 percent and 4.8 percent in the years 2000, 2001 and 2002, respectively.

Valerii Lytvytskyi, an economist and advisor to the National Bank of Ukraine, said that NBU monetary policy helped to promote the latest industrial growth.

"The [prime] rate of the NBU [in 2003] went from 9.5 percent to 7 percent. It spurred economic growth, yet kept inflation away from double digits," explained Mr. Lytvytskyi.

The NBU's chief concern at the beginning of the year was deflation, which stood at 0.6 percent as 2002 ended, the first downward price spiral ever recorded in Ukraine. That problem was rectified by the NBU and prices went the other way in 2003, rising by 8.2 percent. But the Ministry of the Economy said the rate was not a concern, inasmuch as it was a direct result of a hot economy.

The ministry placed most of the blame on flour and bread price increases, which were fueled by poor weather conditions in the spring that led to a poor grain harvest for 2003, as well as a grain sale scandal within the agricultural sector. At the close of the year, flour, bread, noodle and bakery product prices had risen by some 35 percent.

Speaking in Zhytomyr, Prime Minister Yanukovych said he would not allow grain prices to increase any further before the next harvest.

"We are making sure that there will be no more price increases for bread. The situation will be difficult until the next harvest," explained Mr. Yanukovych, according to Interfax-Ukraine.

Recently announced government figures stated that Ukraine barely managed to harvest 20 million tons of grain last year - half of what it collected in 2002 - when the harvest came in at a figure just short of 40 million tons.

Ukraine's banking sector also showed healthy growth in 2003. The country's monetary supply grew by 95 billion hrv, another contributing factor to inflation. Banks were able to capture some of that currency as deposits by commercial and legal structures increased by 55.7 percent to 29 billion hrv. Private individuals also showed a decidedly increased inclination to trust Ukraine's financial institutions by depositing 32.3 million hrv into bank accounts, an increase of 67.2 percent over the previous year.

The amount of credit extended by Ukraine's banks rose dramatically in 2003 as well, to 67.8 billion - a 61.4 percent increase. The average interest rate for hryvnia loans fell from 19.5 percent at the beginning of the year to 17.8 at year's end, while the average rate for foreign currency loans stood at 11.2 percent.

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