Economics Department

Economic Assessment of Ukraine 2007

 

 

Contents |  How to obtain this publication | Additional info

Published on 4 September 2007. 

An Economic Assessment of selected, globally important non-member countries is prepared as part of the Organisation's outreach on a case-by-case basis. The focus is on the macroeconomic and structural developments which most likely constitute barriers for the long-term sustainability of growth and therefore require policy attention. Read more about how Economic Assessments are prepared. The OECD's conclusions concerning the main economic challenges faced by Ukraine are available by clicking on each chapter heading below.

See the press release and bookmark this page: www.oecd.org/eco/surveys/ukraine.

 

 

Contents                                                                                                                           

Chapter 1. Macroeconomic performance and policy: the challenge of sustaining growth


This Chapter presents an analytical overview of recent economic performance and macroeconomic policy. Its main conclusions are as follows:

  • Recent strong growth has been partly driven by factors that are likely to prove transitory. If Ukraine is to sustain strong growth over the medium-to-long term, it must make the transition to a pattern of self-sustaining investment- and innovation-led growth.
  • Macroeconomic management kept debt low and deficits in check, but pension system sustainability presents a serious challenge, and the economy is already subject to a very high level of fiscal pressure.
  • A de facto nominal dollar peg remains the cornerstone of monetary policy. While such a peg served Ukraine well in the aftermath of the 1998 financial crisis, it is now contributing to inflation volatility and increasing risks, particularly those associated with growing dollarisation.
  • The major challenges facing Ukraine as it seeks to embark on a sustainable “catch-up” path include improving framework conditions for business, reforming product markets to make entry and exit easier, and strengthening competition.


Chapter 2. Reducing barriers to growth: the role of institutional and regulatory reform

 

This chapter focuses on two aspects of economic governance in Ukraine. The first concerns the basic institutions of Ukraine’s market economy and the framework conditions for business. These remain a major impediment to sustained growth, in so far as they deter investment. The issues here have primarily to do with the instability, unpredictability and opacity of a great deal of public policy. The second set of issues concerns the specific regulatory and institutional barriers to entry, exit and restructuring, which constitute a related but nevertheless distinct problem. The overall burden of regulation in Ukraine is extremely heavy by OECD standards and tends to distort, or at least mute, competition. Exit mechanisms, in particular, function poorly in Ukraine: the empirical evidence suggests that Ukraine has too little exit overall and that the link between productivity and exit is very weak. These findings highlight the potential contribution of competition-friendly regulatory reform to Ukraine’s long-term economic prospects.

 

Chapter 3. Raising the competitiveness of the economy


This chapter explores the challenge Ukraine faces in maintaining and enhancing its competitiveness over the long term. Ukraine’s current international specialisation is rather narrowly based – it has revealed comparative advantages in only a limited number of sectors. Moreover, while productivity growth has been particularly impressive in recent years, Ukrainian producers will come under increasing pressure in future from rapidly rising energy and labour costs, and the tendency towards real appreciation vis-à-vis dollar-linked Asian currencies. Moreover, opportunities for relatively easy productivity gains via labour-shedding and increased capacity utilisation are becoming rarer. Enhanced competition could play a very important role in strengthening competitiveness. In Ukraine as elsewhere, competition stimulates better firm performance, but competition in many markets in Ukraine is still too weak, owing to structural factors, anti-competitive regulation and weak institutions. Increased FDI inflows and renewed privatisation could also help Ukraine maintain strong productivity growth. The chapter presents the results of a study of the effect of privatisation on multifactor productivity in Ukraine, which confirms the substantial benefits of privatisation – to domestic or foreign owners – for productivity growth.

 

 

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded in English. It is also available in German: Policy Brief (pdf format). It summarises the OECD assessment. The complete edition of the OECD Economic Assessment of Ukraine 2007 is available from:

 

An Executive Summary in Ukrainian is available: ЕКОНОМІЧНА ОЦІНКА ОЕСР: Стислий_огляд.

 

Additional information                                                                                                  

 

For further information please contact the Ukraine Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Christian Gianella and William Tompson under the supervision of Andreas Wörgötter.

 

 

 

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