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Ukraine: On a Recovery Path, Amidst Major Challenges

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Roshni Wani Thapa Bio

After two prolonged years of deep recession, with real GDP plunging by 15.7% over 2013-2015, the Ukrainian economy posted a real GDP growth of 2.3% in 2016. This can be attributed to the approval of the International Monetary Fund’s (IMF’s) four-year bailout loan worth approximately US$17.5 billion, in March 2015 that has helped improve consumption levels, amidst slowing inflation. Although real GDP growth is expected to accelerate in the 2018-2020 period, thanks to modest growth in exports and domestic demand, numerous challenges face the economy, including its large dependence on external borrowing. Ukraine’s banking sector is struggling, with around 77.0 Ukrainian banks declared insolvent over 2014-2016, incurring losses worth UAH435 billion (according to trade sources). The financial system remains heavily dollarised and non-performing loans are expected to reach a record high level of 88.4% of total gross loans in 2017. The banning of the Russian payment systems, in October 2016, will worsen the situation, making money transfers from Russia more complex, given Russia still accounts for a large share of Ukraine’s foreign trade.

Economic Landscape of Ukraine

Ukraine GDP global rankings out of 203 countries 2016-2022. GDP Growth in Ukraine vs. Eastern Europe and World 2011-2017

Source: Euromonitor International from national statistics/OECD/UN/IMF (WEO)

Notes: (1) Wholesale & Retail Trade includes Repair of Motor Vehicles, Motorcycles and Personal and Household Goods. (2) Financial Intermediation includes Real Estate, Renting and Business Activities. (3) Public Administration includes Defence and Compulsory Social Security. (4) Education, Health & Social Work includes Other Community, Social & Personal Service Activities. (5) Data for 2017 is forecast

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