Yearender: Ukraine struggles in financial turmoil, recovery expected next year

by Mu Liming

KIEV, Dec. 25 (Xinhua) -- Ukraine's economy suffered much from the global financial crisis throughout 2009, including high inflation, an unstable exchange rate and a sharp decline in GDP and foreign trade.

Analysts say the eastern European country would not approach recovery until the second quarter of next year.

ECONOMIC MELTDOWN IN 2009

Ukraine has been in economic turmoil since mid-2008 because it was too dependent on foreign credit and a limited number of heavy industries, such as the metallurgical and chemical industries and machine building.

The country's industrial output declined dramatically with a sudden drop in the prices of products that have been Ukraine's main export items.

The Ukrainian State Statistics Committee said exports in the first nine months of this year fell by 45.1 percent, to 34.3 billion U.S. dollars, while imports decreased by 51.3 percent, to 35.4 billion dollars.

Ukraine's real GDP contracted an annual 15.9 percent in the third quarter of 2009 after a shrink of 17.8 percent in the second quarter and a record 20.3 percent in the first. Its total industrial output in the first eleven months dropped 24 percent year-on-year and inflation stood at 13.6 percent.

Ukraine's banking system also saw a loss of 18.2 billion hryvnias (about 2.3 billion U.S. dollars) from January to October, according to a central bank report. About 20 banks found themselves in urgent need of state aid for survival.

BADLY NEEDED LOANS

The International Monetary Fund agreed to a 16.4-billion-U.S.-dollars loan package to Ukraine last year to help stabilize its banking sector. Ukraine has so far received 11 billion dollars to keep its economy financially afloat.

The IMF, however, delayed some of the payments, stressing Ukraine needed to implement key economic reforms, including a tough 2010 budget, before more funds could be disbursed.

Last week, Ukraine made an urgent appeal to the IMF for about 2billion dollars in emergency loans to ease "an extremely difficult situation" in meeting its external obligations and avoiding the danger of a "spill-over effect" on other economically vulnerable states.

However, it seems unlikely the IMF will provide more of the bailout loan any time soon because of the country's political uncertainty.

It is still not clear who would take the helm of the country as President Viktor Yushchenko, Prime Minister Yulia Tymoshenko and former Prime Minister Viktor Yanukovich are all campaigning for next month's presidential election, the first since the 2004 Orange Revolution.

STRUGGLE FOR RECOVERY

Since the global financial crisis started in mid-2008, Tymoshenko's government has taken a series of measures to save the country's economy, one of the most troubled in Europe.

It passed a package of measures aimed at stabilizing the national currency and the banking sector, encouraging foreign trade and investment, creating jobs and cutting government spending.

Most analysts believe the worst of the crisis is over and the country's economy has gradually stabilized. Oleksandr Shlapak, Yushchenko's top economic aide, said in mid November that Ukraine's economy has touched the bottom.

The Economy Ministry and the central bank also expect the country's gross domestic product to rise by at least 3 percent in 2010.

Meanwhile, the World Bank predicted the country would begin a gradual recovery starting in 2010, after a 15-percent fall in its economy in 2009.