Economy of Ukraine

In Soviet times, the economy of Ukraine was the second largest in the Soviet Union, being an important industrial and agricultural component of the country’s planned economy. With the dissolution of the Soviet system, the country moved from a planned economy to a market economy. The transition process was difficult for the majority of the population which plunged into poverty. Ukraine’s economy contracted severely following the years after the Soviet dissolution. Day to day life for the average person living in Ukraine was a struggle. A significant number of citizens in rural Ukraine survived by growing their own food, often working two or more jobs and buying the basic necessities through the barter economy.

In 1991, the government liberalised most prices to combat widespread product shortages, and was successful in overcoming the problem. At the same time, the government continued to subsidise state-run industries and agriculture by uncovered monetary emission. The loose monetary policies of the early 1990s pushed inflation to hyperinflationary levels. For the year 1993, Ukraine holds the world record for inflation in one calendar year. Those living on fixed incomes suffered the most. Prices stabilised only after the introduction of new currency, the hryvnia, in 1996.

The country was also slow in implementing structural reforms. Following independence, the government formed a legal framework for privatisation. However, widespread resistance to reforms within the government and from a significant part of the population soon stalled the reform efforts. A large number of state-owned enterprises were exempt from the privatisation process.

In the meantime, by 1999, the GDP had fallen to less than 40 percent of the 1991 level. It recovered considerably in the following years, but still doesn't reach historical maximum. In the early 2000s, the economy showed strong export-based growth of 5 to 10 percent, with industrial production growing more