EXECUTIVE SUMMARY:
- World economic crisis resulted in drop in external demand for Ukrainian products and restricted access to external financing for corporate sector. As a result, real GDP declined by 15.1% in 2009.
- Economic crisis coupled with high political uncertainty resulted in contraction of real gross fixed capital accumulation by record 46.2%.
- Agricultural sector suffered the least from economic crisis being supported by growth in livestock.
- In the beginning of 2009 most serious gas sector conflict ever seen in Europe happened.
- Russia and Ukraine signed a contract, according to which the parties agreed to calculate the price for imported natural gas according to formula-based approach.
- Metallurgy and chemical industry, which suffered substantially due to plunge in external demand, enjoyed discounted gas and fright transportation tariffs.
- The current account and financial account were in deficits due to rapid decline in exports and substantial outflow of capital.
- Economic crisis resulted in larger drop of merchandise imports than exports, which resulted in narrowing trade deficit in goods.
- Population welfare deteriorated in 2009. Unemployment rate (ILO) increased, while real wages contracted by 9.2% in real terms.
- The deterioration of economic conditions resulted in the increased pressure on fiscal expenditures. Even though central fiscal revenues were lower than in 2008 for entire year, the Government did not sequester the budget.
- The IMF provided the instalments at USD 4.7 bn for fiscal purposes. As a result, the Government financed pensions in time and in full, while the NJSC Naftogaz was able to pay for imported gas.
- State debt surged, though remaining at moderate level by international standards
- Social standards were sharply raised in the end of 2009 increasing concerns on fiscal sustainability.
- The Pension Fund expenditures increased to 18% of GDP, being largely financed at the expense of central fiscal transfers and State Treasury loans.
- Consumer inflation decelerated, while money supply declined.
- Hryvnia was more stable, being supported by NBU interventions.
- Most financial institutions succeeded to survive.
