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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2010UKRAINIAN STOCK EXCHANGEECONOMIC AND POLITICAL DEVELOPMENTSGeneral Political EnvironmentOn December 26 2004, the so-called OrangeRevolution brought President ViktorYushchenko and his Our Ukraine (NU) party topower in coalition with other liberal democraticparties, in particular the Bloc Yulia Tymoshenko(BYuT) led by Mr. Yushchenko’s ally andprincipal rival Yulia Tymoshenko. Since thattime Ukraine has experienced profoundpolitical instability characterised by the bitterrivalries within the former Orange forces.Ukrainian politics are dominated by regionalinterests including oligarchs who enjoy politicaland economic power. The 2004 electionchanged the balance of power in the countryby shifting power away from these easternoligarchs. With Mr. Yushchenko, a more pro-Western leader in place, the governmentbegan to tackle corruption, however it has notbeen entirely successful in these efforts.Reform has been uncoordinated, especially atthe level of institutions which has contributedto instability and the present deadlock inUkrainian politics. The current political climatein Ukraine is one that moves from crisis tocrisis. The profoundly vitriolic relationship thathas developed over the past four yearsbetween President Yushchenko, his allies andclose advisors, and PM Tymoshenko and herallies is a key factor behind the current politicalcrisis which closely parallels the country’scurrent economic crisis.In early April 2007, Mr. Yushchenko issued apresidential decree to dissolve the Rada andforce parliamentary elections in mid-May toostensibly solidify his position. This was initiallythwarted by Mr. Yanukovich and members ofthe Rada allied with the PoR. Elections wereheld on 30 September 2007 resulting in thePoR being returned with the largest number ofseats (175). However, an agreement betweenNU and the BYuT to form a renewed coalitionwith their combined 228 seats brought afractious Tymoshenko-Yushchenko coalitionback to power. BYuT was the dominant party inthe coalition and Yulia Tymoshenko wasreturned as PM following a very narrowconfirmation vote in the Rada in which severalNU deputies failed to back her candidacy. Thedeep personal animosity between Mr.Yushchenko and Mrs. Tymoshenko bredinstability in the coalition and led to policyparalysis. This paralysis led to the collapse ofthe coalition in mid-September 2008 and thesubsequent dissolution of the Rada andcalling of snap elections by PresidentYushchenko. These were put off and a new(though old) coalition of BYuT, NU-NS, and theVolodymyr Lytvyn Bloc with some new cabinetmembers took office in Dec. 2008. As theglobal economic crisis took hold in Ukraine thedegree of political instability and weakleadership was exposed. The current politicalsituation in Ukraine reveals a country in deepcrisis. The seriousness of the economicsituation is reflected through the depreciatingcurrency; the IMF’s intervention to shore up acollapsing banking sector and provide fiscalsupport; depressed commodity prices’ impacton the steel sector; and anticipated privatesector defaults.Investment EnvironmentThe government is committed to attractingforeign investment to Ukraine. Most sectorsare fully open to FDI, however somerestrictions remain in key sectors includingbanking and telecoms. There is widespreadcorruption at all levels of the system, aidedand abetted by an unwieldy Soviet-erabureaucracy where vested interests can stifleinvestment. The risk of FDI being challengedby oligarchic interests and their political alliesis a continuing challenge. Given the desire ofthe government and the political parties toaddress governance issues there has beenconspicuously little attention directed towardsregulating investors, thus the investmentenvironment continues to function with little byway of encumbrances. Ukraine acceded tomembership in the WTO in February 2008 andis currently negotiating a free trade agreementwith the EU; its largest trading partner. Muchneeded reforms to the judicial system are onhold at present contributing to somedeficiencies in the rule of law in Ukraine.** http://www.edc.ca/english/docs/gukraine_e.pdfKey Information ContactsSecurities and Stock Market State Commission www.ssmsc.gov.uaMinistry of Finance www.minfin.gov.uaState Property Fund of Ukraine www.spfu.gov.uaState Committee of Financial Monitoring www.sdfm.gov.uaState Commission for Regulation of Financial Services’ Market in Ukraine www.dfp.gov.uaREAL GDP(UAH millions)CONSUMER PRICES (% CHANGE PA; AV)(%)800700600500400300200100052005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 20103025201510PAGE 160
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2010UKRAINIAN STOCK EXCHANGEUKRAINE ECONOMIC CHARTS AND TABLES2005 2006 2007 2008 2009 2010Nominal GDP (US$ at PPP) bil US$ 263 291 (a) 323 (a) 338 (a) 290 (a) 297 (b)Real GDP bil UAH 622 668 720 737 624 (a) 630 (b)Real private consumption bil UAH 318 367 430 473 411 (a) 399 (b)Real government consumption bil UAH 122 127 129 130 131 (a) 132 (b)Real gross fixed investment bil UAH 132 159 198 202 107 (a) 111 (b)Real stockbuilding bil UAH 4 1 5 16 -17 (a) -5 (b)Real exports of G&S bil UAH 334 315 323 341 276 (a) 286 (b)Real imports of G&S bil UAH 271 294 364 426 284 (a) 292 (b)Real domestic demand bil UAH 576 654 762 821 632 (a) 636 (b)Real GDP at factor cost bil UAH 269 286 (a) 310 (a) 318 (a) 269 (a) 272 (b)Real agriculture bil UAH 35 36 (a) 34 (a) 38 (a) 39 (a) 40 (b)Real industry bil UAH 93 99 (a) 110 (a) 104 (a) 79 (a) 81 (b)Real manufacturing bil UAH 57 (a) 62 (a) 70 (a) 68 (a) 48 (a) 50 (b)Real services mil UAH 141 151 (a) 167 (a) 176 (a) 152 (a) 151 (b)Gross national savings rate (%) % 25.6 23.3 24.5 (a) (a) 21.8 (a) 20.2 (a) 21.1 (b)Gross national savings/investment % 113.0 93.9 86.9 79.5 94.3 (a) 94.7 (b)Budget balance (% of GDP) % -1.7 -0.6 -1.1 -1.5 -9.0 (a) -5.5 (b)Consumer prices (% change pa; av) % 13.5 9.1 12.8 25.2 16.0 (a) 12.0 (b)Exchange rate LCU:US$ (av) UAH/US$ 5.1247 5.0500 5.0500 5.2672 7.7977 (a) 8.0437 (b)Lending interest rate (%) % 16.2 15.2 13.9 17.5 20.5 (a) 17.0 (b)Stock of domestic credit mil UAH 146,752 248,631 440,027 778,432 900,347 (a) 979,831 (b)Domestic credit growth (%) % 34.3 69.4 77.0 76.9 15.7 (a) 8.8 (b)Deposit interest rate (%) % 8.6 7.6 8.1 9.9 13.5 (a) 12.0 (b)Population million 46.7 46.5 46.2 46.0 45.7 (a) 45.5 (b)GDP per head ($ at PPP) US$ 5,625 6,270 (a) 7,000 (a) 7,360 (a) 6,350 (a) 6,530 (b)Current account balance/GDP % 2.9 -1.5 -3.7 -7.1 -1.2 (a) -1.2 (b)International reserves bil US$ 19 22 32 32 25 (a) 24 (b)Trade balance bil US$ -1 -5 -11 -16 -4 (a) -4 (b)Foreign-exchange reserves bil US$ 19 22 32 31 25 (a) 23 (b)Total foreign debt bil US$ 33 50 74 96 (a) 92 (a) 95 (b)Public medium & long-term bil US$ 10 10 11 12 (a) 12 (a) 12 (b)Private medium & long-term bil US$ 10 24 40 54 (a) 52 (a) 49 (b)IMF debt bil US$ 1 1 0 5 11 (a) 16 (b)Short term bil US$ 12 15 23 26 (a) 17 (a) 18 (b)Net debt bil US$ 14 28 41 64 (a) 67 (a) 71 (b)Export credits bil US$ 1 1 1 (a) 1 1 (a) 1 (b)(a) Estimate (b) ForecastThe Economist Intelligence Unit Limited, December 2009TRADE BALANCE(US$ billions)REAL GROSS FIXED INVESTMENT(UAH millions)0250-2-4200-6-8-10150100-12-1450-162005 2006 2007 2008 2009 201002005 2006 2007 2008 2009 2010PAGE 161
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