Ukraine faced a year of mixed economic news in 2015.
On the positive side, Ukraine avoided bankruptcy by taking on a $40-billion bailout package led by the International Monetary Fund, which approved $17 billion in lending of its own money. Kyiv restructured $15 billion of sovereign debt in November and passed crucial anti-corruption and deregulation laws.
Kyiv also sealed a number free-trade deals with Western countrie to boost the economy and make the nation less dependent on Russia. The banking sector is being cleaned up and stabilized.
Some of the bad news: Ukraine failed to privatize state-owned enterprises and risked, as of Dec. 24, losing a multibillion-dollar Western loan package if it does not adopt a fiscally responsible tax code and budget for 2016.
Free trade, open skies
Ukraine signed two free-trade agreements, with Canada and the 28-nation European Union, and is negotiating a deal with Israel. The agreements mean elimination of many import-export tariffs.
The Kremlin responed by suspending trade privileges for Ukraine on Jan. 1, the same day that the EU-Ukraine trade pact takes hold.
Ukraine has signed an open skies agreement with the U.S., which will allow more flight traffic while the EU signed an open skies agreement with Lviv in western Ukraine.
Big-scale investments
Steel giant Arcelor Mittal and sunflower and seed producer Cargill invested at least $1.3 billion in 2015. In addition, the European Bank for Reconstruction and Development signed about €700 million of new business projects, while Japanese company Fujikura is investing an initial $6 million to open a branch in Lviv to manufacture car parts. Astarta, a sugar producer and farmer of nearly 400,000 hectares, got $35 million in financing from the World Bank’s International Finance Corporation, according to Asters law firm in Kyiv.
China-Ukraine relations
The opening of a Chinese Commerce Association in Kyiv on Sept. 7 is not only symbolic but an encouraging sign of more bilateral trade. China, with the world’s second largest economy, is Ukraine’s second-largest single trading partner after Russia. Bilateral trade turnover last year amounted to $8.6 billion. On March 26, Ukraine signed a $15 billion memorandum with China’s CITIC Construction firm to build affordable housing at minimal interest rates over 15 years. This month, the China Development Bank and Chinese telecommunication equipment maker Huawei signed financial agreements worth $50 million with Ukrtelecom, the nation’s near fixed-line monopoly operator owned by Rinat Akhmetov’s System Capital Management. The company plans to establish a network management system managed out of Kyiv and over Ukraine’s six largest cities, according to Dragon Capital.
Agriculture
Germany signed a deal with Ukraine to open a German-Ukrainian Chamber of Commerce and Industry in Kyiv. German interests include exporting agriculture machinery to Ukraine, the world’s sixth-largest wheat exporter. Agriculture has been Ukraine’s most profitable economic sector with an 61 million tons of grain harvested this year, of which 20 million tons were exported since July 1, according to Agriculture Ministry data. At least 14 permits were canceled and six licenses eliminated to cut bureaucracy. Parliament also passed a bill on Dec. 8 that will slash an additional 22 permit procedures.
Infrastructure
The Infrastructure Ministry works closely with the Agriculture Ministry since ports are the main way to export grain. Ukraine’s Infrastructure Minister Andriy Pyvovarsky moved to cut regulations to speed up clearance time. The ministry also managed to corporatize the most corrupt state-enterprise Ukrazaliznytsia. On Dec. 24, a single public procurement database of 15 state-owned enterprises was introduced for Hr 5 billion worth of planned procurement for next year.
Shortcomings
The government failed to privatize 1,800 state-owned enterprises – institutions that are draining $5 billion yearly. How Ukraine’s leaders resolve the disputes will, of course, have a direct bearing on next year’s economy. The nation may only officially produce $94 billion in goods and services next year, a tiny amount for a nation of 44 million people.
