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Ukraine: Economic Performance Leads Region In 2001

An economic research report says that despite a slowdown in much of the world, the economies of six nations of Southeastern Europe registered excellent performances in 2001. PlanEcon says that the group's leading economy -- that of Ukraine -- grew phenomenally. But prosperity has not necessarily reached people in the lower economic levels of Ukraine, and reforms driving the country's growth are uneven.

Prague, 18 January 2002 (RFE/RL) -- A U.S.-based economic research firm, PlanEcon, says that Ukraine turned in a superior economic performance last year, its gross domestic product (GDP) growing at a rate of about 9 percent and leading its region.

PlanEcon's report credits economic reforms pushed through by former Prime Minister Viktor Yushchenko for much of the growth.

Of course, Ukraine's 9 percent growth in GDP in 2001 is explained in part by the low productive base with which it started the year, and in part by the growing purchasing power of its main trading partner, Russia.

The report also says the government of current Prime Minister Anatoliy Kinakh has delayed some reforms and that growth is unlikely to continue at such a high speed.

Elsewhere in Southeastern Europe, growth rates ranged from 5 percent in Romania down to 3 percent in Slovenia, with Bulgaria, Croatia, and Slovakia falling in between.

GDP, the sum of the value of goods and services produced by workers and capital in a country or region over a stated period, is the broadest gauge of the health of an economy. PlanEcon is a U.S.-based economic research firm specializing in the economies of Central Europe and Russia.

Reached by telephone in Kyiv, Ukraine Country Director Andrew Seton of the European Bank for Reconstruction and Development (EBRD) agrees that Ukraine's economy has responded well to reforms instituted in 2001. He says he is convinced that Ukraine's economic improvement will continue.

"The momentum was perhaps a bit uneven last year but there is every sign of it being resumed at present, and I think that the sort of reforms that have been initiated are the kind that go forward and are probably unstoppable," Seton said.

The PlanEcon report, written by analyst Zbyszko Tabernacki, says demand within the country and agricultural exports -- especially to a strengthening Russia -- drove much of last year's growth in Ukraine. Tabernacki cited, in particular, Ukraine's record grain harvest of nearly 40 million tons, up 63 percent from the year 2000.

The EBRD's Seton says the bank is heartened by developments in agriculture. He says he expects most economic improvements in the near term to be in agriculture.

"We continue to see a lot of possibilities in the agri-business, food-processing sector, with private Ukrainian companies as well as, hopefully, some international investors coming into the country as people get the message about Ukraine," Seton said.

PlanEcon says that parliamentary elections scheduled for 31 March are likely to be crucial for the country. It says Viktor Yushchenko's newly formed Our Ukraine bloc and the Communist Party of Ukraine appear now to be leading contenders and about even, followed by President Leonid Kuchma's coalition of oligarchs and other allies.

In his position as a banker and the EBRD's representative, Seton avoids commenting on politics and individual leaders. But he speaks approvingly of what he calls a strengthening "new constituency" in Ukraine.

"I think that private business is learning fast in Ukraine. I think small businesses are gradually becoming a more important part of the economy and are becoming a more important constituency in the country," Seton said. "It is their demands, I think, that will be the strongest demands for change."

Both Seton and PlanEcon analyst Tabernacki note that the improvement in Ukraine's economy is relative, and that the growth rate is large only because the country began at such a low point. Seton points out that the average wage is still equivalent to just $38 a month.

Tabernacki writes, nonetheless, that improvements in Ukraine's economy are significant and that international ratings agencies have taken favorable notice. He says that Standard & Poor's assigned its long-term local and foreign currency credit ratings to Ukraine in December, and adds that the outlook on all ratings now is stable.

EBRD Country Director Seton says that Ukraine deserves more international attention.

"The other thing we [bank officials] would dearly like to see is more international interest in this country, which I think deserves more international investment now, deserves more attention from big international corporates, because the country really is growing apace," Seton said.

Seton says the EBRD and Ukraine's government signed an understanding this week on developing a method for generating financing based on farmers' receipts for stored grain. He says the country has made major advances in providing for land ownership.