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You're reading: Ilya Timtchenko: EU advantages for Ukraine

For good
reasons, much of the attention of the Ukrainian protests has been put on being
pro-civil rights and not necessarily on pro-European integration; yet, it is
also important not to forget the economic consequences of Ukraine’s only two
options – the EU or Russia’s Customs Union. 

At a
quick glance, here is an overview of Ukraine’s economy. According to the World Bank,
Ukraine is in the lower middle-income level with a $3,500 GNI per capita. The
income share held by the lowest 20% slightly increased since 2004 to 2010 from
9.0% to 9.9% respectively. In contrast, the income share held by the highest
20% decreased from 37.3% to 35.7%. This means that almost no progress at all
has been made in decreasing the gap since the Orange Revolution. In addition, Ukraine
is expected to experience a 15% devaluation of the hryvnia peg to relieve
pressure on Ukraine’s foreign-exchange reserves. Ukraine’s economy has been in
sharp decline in the past two years and its near-term growth outlook and
stability are worrisome. Lastly, nominal incomes of Ukrainian citizens are
being strongly underestimated relative to their real purchasing power.

Ukraine’s
proximity to Russia has always been a concern for the EU. The two countries’ relatively high social
integration ties are a strong factor in evaluating Ukraine’s economic institutions
with Russia.

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