Transcript Why is Ukraine Where It Is Now?

Why is Ukraine Where It Is
Now?
Lecture on Economies in Transition
Econ 355
Lecturer: Galina Didukh
Relevant Literature
• Ukraine at the Crossroads. Ed. By Siedenberg
and Hoffman. 1999
• Ukrainian Economic Trends: Quarterly Issue,
June 2001. UEPLAC
• Recent Developments in the Transition
Process. EBRD: www.ebrd.com
• Strategies for Central and Eastern Europe. Ed.
Kozminski and Yip. 2000
• Pomfret, Richard. 1997. Development
Economics: pp. 266-276.
Map:
CEE
and
Baltic
States
Map of Ukraine
Ukraine at a glance
• “frontier land”
• 2nd largest landmass:
604,000 sq km
• Population of 50 mln
• 68% - urban
• Well-educated highly
skilled labor force
• “bread basket” of SU
• Aug 1991 – declared
independence
• 1994 – Kuchma starts
economic reforms
• 1999 and 2001 –
reelection and
reshuffling of cabinet
Growth in Countries in Transition
• On average started to grow in 1996
• CEE (Central and Easter Europe) in 1994
• CIS (Commonwealth of Independent States)
in 1997
• 2000 – first year of Ukraine’s economy
growth
GDP Growth in Transition
Economies (% change from previous year)
Table 1:
Growth
1991
1992
1993
1994
1995
Sustained
-12.8
-18.4
-7.8
1.0
4.5
For 1-2 yrs. -6.9
-15.9
-9.7
-14.7
-6.1
Reversed
-17.5
-7.8
3.2
5.0
6.3
None
-8.3
-11.2
-12.2
-20.9
-10.2
Ukraine
-11.9
-17.0
-14.2
-22.9
-12.2
Table 1 continued
(source: IMF, EUROSTAT, Derzhkomstat of Ukraine)
Growth
1996
1997
Sustained
5.0
6.0
For 1-2 yrs. -0.1
3.6
Reversed
1.0
-6.8
None
-8.9
-14.1
Ukraine
-10.0
-3.2
1998
1999
2000
-1.9
-0.2
5.8
What Determines Growth
(in Economies in Transition)
• Starting point: economic conditions,
institutional characteristics, political
histories
• Investment + productivity growth
• Efficiency improvements!!!
• Price stability
• Structural reforms
What determines growth (continued)
• Structural reforms:
- privatization and price liberalization, wellfunctioning factor and product markets
• Institutional infrastructure: legal framework,
transparent administrative policies
• limited government intervention
Reforms and growth: U-shaped
relationship
Growth
Reforms
What has gone wrong in
Ukraine?
•
•
•
•
•
Inflation?
Initial conditions (overindustrialisation)??
Large costs of reallocation of ethnic groups?
Insufficient structural reforms!!!
- institutional development: lack of property
rights security
Structural Reform Index in
Transition Economies (source: EBRD)
Table 2:
Countries 1991
1992
1993 1994
1995
CEE
0.55
0.71
0.77
0.76
0.69
CIS
0.10
0.29
0.36
0.45
0.50
Ukraine
0.10
0.23
0.13
0.33
0.53
All
0.33
transition
0.51
0.57
0.61
0.60
Table 2 continued
Countries 1996
1997
CEE
0.71
0.73
CIS
0.53
0.54
Ukraine
0.56
0.57
All
0.62
transition
0.64
1998 1999
2000
What has gone wrong?
(continued)
• Institutional development:
• - unpredictability of laws and policies,
arbitrary application of rules
• - high level of government interference
Table 3: Relative Size of Industry
and Government (IMF)
Transition
countries
All
Share of industry Share of gov. exp.
in 1990 GDP (%) in 1997 GDP (%)
44
36
CEE
47
41
CIS
41
30
Ukraine
44
42
Table 4: Growth in Agro Sector
real GDP
(1990=100)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
92.61
76.00
46.90
42.48
40.89
41.30
39.95
39.25
40.50
agricultural
number of
GDP
privatized
(1990=100) enterprises
100.00
81.35
77.44
30
80.27
3585
66.48
11552
65.09
28272
48.00
48118
43.81
57009
39.30
62349
36.18
67998
38.27
73349
Agriculture (continued)
• Slow adjustment to
market conditions
• 1992 – Land code
introduced right to
lease land
• 1998 – Law on Land
Leasing
• 2001 – no right to
freely dispose of land
shares
• 6.6 mn holders of
certificates
• 4.2 ha average size of
land interest
• Privileges in leasing for
CAE (collective agro
enterprises)
Agriculture in Ukraine:
belated structural reforms
• 1999 – collective
enterprises constitute
64% of all agro ent.
• 1999 – 51,000 persons
obtained land plots in
private ownership
• 2001 – collective
enterprises nonexistent
• 2001 – 436, 000
Agricultural reforms
(shortcomings & future directions)
• Eliminate legal ambiguity in regard to land
ownership
• Establish market principles for setting prices
• Provide free market turnover of land certificates
Demographic challenge
•
•
•
•
•
Depopulation
Emigration
1993 – 52.2 mn population
1999 – 50.1 mn
2.1 mn decline: 83.6% natural decrease,
16.4% net migration
• Aging of population
Table 5: Population Age Groups
source: SSCU data (Steshenko 1999)
Age total
group
1989
1999
1989
1999
1989
1999
0-14
21.6
18.5
21.9
17.9
20.9
19.7
15-59 60.4
61.4
63.2
64.7
54.9
54.6
60+
20.1
14.9
17.4
24.2
25.7
18.0
urban
rural
Table 6: Dependency Ratios
per 1,000 working age population
source: SSCU data (Steshenko)
total
urban
Rural
1989 1999 1989 1999 1989 1999
Non791
working
Young 412
768
696
669
1.017 1.019
356
387
327
447
430
60+
412
299
342
570
589
379
Figure 1: Age Pyramid
source: Steshenko 1999
Figure 2: Fertility Rate
source: Steshenko 1999
Figure 3: External Migration
source: Steshenko 2000
European Integration
• 2000 – President of Ukraine approved the
Program for Integration into EU
• 13 applications from CEE countries,
Cyprus, Malta and Turkey for EU
membership
• The Union is expected to enlarge from
Europe-15 to Europe-27 starting from 2002