Ukrainian Prime Minister Volodymyr Groysman used the regular meeting of the Cabinet of Ministers on Feb. 13 to pat his government on the back for its achievements in 2018, reporting improved economic growth, brisker trade, and lower national debt.
But his report on the country’s major economic and social results last year also highlighted Ukraine’s low wages and pensions, and slow growth of gas production.
Groysman pointed to last year’s 3.2 percent growth in gross domestic product and inflation dipping below 10 percent in 2018 as being among his government’s main economic achievements.
“These are very optimistic figures, which indicate that the stability of the national currency and prices will be acceptable in the next year,” said Groysman.
He said that 957 industrial sites had been constructed or modernized across Ukraine in 2018.
Groysman said that was due to the government following a balanced budget policy, which had also helped to decrease budget deficit to 1.7 percent from the planned 2.4 percent.
At the same time, the agricultural sector has played a vital role in Ukraine’s economic stability, Groysman said. In 2018, almost 40 percent of export earnings, or $18.6 billion, came from agricultural exports.
Overall budget revenues were Hr 928.1 billion, or some $33.1 billion, which is only 17 percent more than in 2017. However, it was a 50 percent rise on 2016.
The state debt in relation to the country’s GDP fell to 60.9 percent of GDP, almost 20 percent less than in 2016, Groysman said. But it is still far higher than in 2011, when it was only 27.5 percent, according to the Finance Ministry.
Ukraine’s foreign exchange reserves also improved, to $20.8 billion in 2018.
“This is the highest figure in the last five years,” said Groysman.
International trade
Ukraine’s exports were worth $53.8 billion in 2018, 10 percent more than in 2017, according to Groysman. However, they still lag behind imports, which were $56.8 billion, the State Fiscal Service of Ukraine reported, producing a trade deficit.
Ukraine’s international trade was highly concentrated on the European market, which took a 43 percent share – 15 percentage points more than in 2017.
“In fact, trade is growing every year, and businesses are also actively searching for new markets on their own,” Groysman said.
Missed targets
Russia’s invasion and occupation of Ukraine’s Crimea, and the launch of its war in the eastern Donbas region of Ukraine in 2014, dealt a blow to Ukraine’s gas production. The country lost control of 11 gas fields with total reserves of 58.56 billion cubic meters, and foreign oil and gas firms that had been considering investing in Ukraine shelved their plans.
Ukraine extracted only 21 billion cubic meters of the 32 billion cubic meters of gas per year that the country needs to satisfy domestic demand in 2018.
While that was 2.5 percent more than in 2017, Groysman said he was disappointed that UkrGasVydobuvannya, or UGV, a subsidiary of the state-owned oil and gas monopoly Naftogaz of Ukraine, was failing to hit its production targets.
“I’m extremely dissatisfied with the fact that UkrGasVydobuvannya is failing to fulfill the plan for gas production by 2020 that we approved. It’s very worrying,” Groysman said.
UGV says it was able to increase the number of wells it drilled only last year, when it brought in foreign drilling contractors such as Croatia’s Crosco and China’s Baiken. Well-drilling times should now fall from three years, or 1,100 days, to 100-110 days, according to Mykhailo Paduchak, the head of UGV’s drilling department.
Local authorities have also caused delays by not issuing licenses to allow drilling in new gas fields, Andriy Kobolyev, Naftogaz of Ukraine’s CEO, told the Kyiv Post in a recent interview.
On the plus side, due to energy-efficiency programs and the development of renewable energy, Ukraine was able to reduce gas imports to 10.6 billion cubic meters – almost a quarter less than in 2017.
Infrastructure
Groysman said roads, one Ukraine’s biggest infrastructure headaches, would continue to be a priority.
The government spent $1.5 billion in 2018 on repairing 3,800 kilometers of roads, including 206 kilometers of the “Go Highway” – a motorway route between Poland’s Gdansk on the Baltic Sea and Ukraine’s Odesa on the Black Sea. This year the road budget is rising to Hr 56 billion, or more than $2 billion, Groysman said.
“We have the highest pace of repairs of Ukrainian roads for the past 14 years,” the prime minister said. “If they’d have been repaired (in the past) like we’re repairing them now, we wouldn’t be in such a situation.”
More than 7,000 kilometers of roads have been repaired over the past four years, according to Infrastructure Minister Volodymyr Omelyan. But that’s only a fraction of the total length of Ukraine’s roads – 430,000 kilometers.
“Unfortunately, the government is not at Hogwarts, we don’t have magic wands to repair all the roads of Ukraine, which have not been repaired for decades,” Omelyan said on Feb. 8 in Ukraine’s parliament, the Verkhovna Rada.
There was better news from the railroads, with the Beskidy Railway Tunnel opening in Ukraine’s Carpathian Mountains in May 2018. The tunnel links Ukraine’s rail network with the the pan-European transport network Corridor V, stretching from Venice to Slovenia, and Hungary – and now Lviv in Ukraine.
“The opening of the Beskidy Tunnel increased the throughput of goods turnover with the European Union by 60 percent,” Groysman said.
Ukrainian railways also saw a rise in funding, with the government investing Hr 16.9 billion, or some $615 million in 2018, which was 55 percent more than in 2017.
The bad news
The gap between wages in Europe and Ukraine is slowly closing, but it’s still huge.
Groysman said the minimum wage in Ukraine was $150 in 2018. That’s 10 percent of Germany’s and a third of neighboring Poland.
The average monthly salary in Ukraine reached a paltry $325 in 2018, Groysman reported.
The situation with pensions is even worse.
While Groysman proudly announced that the average monthly pension had grown to Hr 2,645, which is 50 percent more than in 2016, that’s still only $96.
Moreover, 5.5 million people in Ukraine receive monthly pensions in the range of only $52 to $70.
