The coronavirus pandemic is far from over, but vaccines are giving the world hope that normal life can return as more restrictions are eased, economies reopen and international travel resumes.
Volodymyr Zelensky’s second year as president showed that much still needs to be done to modernize Ukraine’s economy, instill rule of law and attract desperately needed foreign investment.
But Ukraine is bouncing back. While its gross domestic product fell by 4% in 2020, experts predict 4% growth in 2021.
Despite a turbulent year, the banking sector is starting to generate profits again. The National Bank of Ukraine, which reduced lending rates from 18% in April 2019 to a historical low of 6% in June 2020, nudged them up to 7.5% in April 2021 to tame inflation, which was threatening to go into double digits again.
Slowly and cautiously, Ukraine will finally open its agricultural land market for the first time since the country’s independence. The idea is to start small and get people used to the idea of buying and selling land. Once most restrictions are eased and proper regulations in place to prevent monopolies, a land market could supply a big economic boost since Ukraine has some of the most fertile soil in the world. Other bright spots: The nation’s ever-growing number of tech startups raise millions of dollars in fresh investment every year, making Ukraine one of the best destinations for companies in need of competent techies.
Adaptation is Ukraine’s key to success. Flexibility is the country’s strong suit when it faces adversity. But it comes with a cost. Ukraine’s resilience has a flip side: It’s unpredictable. Several government reshuffles, including two prime ministers, countless leadership changes in such key areas as energy, economy and health, signal inconsistency and uncertainty to investors. When the Cabinet of Ministers flouted principles of corporate governance to replace Andriy Kobolyev with Yuriy Vitrenko as head of state oil and gas company Naftogaz, questions were raised about Ukraine’s commitment to limit the politicization of the economy.
Too much of the nation’s economy is in the hands of the government — including 3,500 state-owned enterprises, or SOEs, and half of the banking sector. Many of the SOEs are inefficient and collectively lose billions of dollars yearly because of corruption and bad management.
The large shadow economy, a symptom of persistent distrust for government, robs the state budget of billions of dollars yearly for public services and infrastructure. Oligarch privileges still drag down the competitiveness of the economy in many sectors. Outright dysfunction remains in the energy sector, marred by billions of dollars in debts.
Despite these tough legacies, Ukraine’s economy still shows enough vibrancy to be hopeful about the future.
From Kyiv Post commercial director Alyona Nevmerzhytska:
We are happy to present you our 7th annual Doing Business magazine. This project has become a must-read for investors and our global audience. It provides an authoritative reality check on key sectors of Ukraine’s economy. Doing Business would not be possible without a general partner — Audi — and our nine section partners — CITI, Darnitsa, ELEKS, EY, GOL, Integrites, Shell, VKP and UMG Investments. Please support them. We thank them all dearly for supporting independent journalism and business coverage in Ukraine. Please enjoy the reading! Distribution points can be found by scanning this QR code.
