Ukraine

V

Economy of Ukraine

Ukraine was the second-ranking Soviet republic in industrial and agricultural production, after Russia. Long known as the “breadbasket of Europe,” Ukraine traditionally had a highly developed agricultural sector because of its vast, fertile lands. It generated more than one-fourth of the total agricultural output of the Soviet Union. Industrial development was a high priority of the Soviet government. In the 1930s Ukraine experienced a rapid and extensive industrial upsurge, mainly in the mineral-rich Donets’k and Kryvyy Rih regions. Because of Soviet development, which emphasized heavy industry, Ukraine possesses one of the most industrialized economies of Europe. However, its industries are highly inefficient and in pressing need of modernization.

The collapse of the Soviet Union brought a dramatic rise in energy costs and a reduction in demand for Ukraine’s products, causing a catastrophic decline in production. The problems were compounded by high rates of inflation and sluggish reforms to increase private ownership of enterprise. In 1995 and 1996, however, inflation was significantly reduced and reforms toward a system based on free enterprise were accelerated. In addition, the United States as well as the International Monetary Fund (IMF) and other international organizations provided large grants and loans. Ukraine was adversely affected by a financial crisis in Russia in 1998. However, in 2000 it registered positive growth in gross domestic product (GDP) for the first time since the Soviet period.

The value of Ukraine’s GDP in 2005 was $82.9 billion. Agriculture, which includes forestry and fishing, accounted for 11 percent of GDP; industry, which includes mining, manufacturing, and construction, accounted for 34 percent; and trade and other services accounted for 55 percent.

A

Labor

The country’s labor force totaled 22.3 million people in 2005. Some 24 percent of workers are employed in industry, 56 percent in the service sector, and 19 percent in agriculture. Trade union membership is strong; the miners’ unions are especially active.

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B

Agriculture

The primary crops are wheat, corn, and sugar beets. Small private plots account for much of the vegetables and fruits that are grown. Livestock raising is widespread and involves cattle, hogs, sheep, and goats. Agricultural output in 2004 was 117 percent of the level in 1990. Collective cooperatives and state-owned farms, holdovers from the Soviet period, continue to outnumber privately owned farms; private ownership is allowed, but lack of capital, social attitudes, and the high cost of fuel have discouraged it. The major agricultural regions are located in central and southern Ukraine, where the fertile chernozem soil is found.

C

Forestry and Fishing

Forestry is based in the Carpathian Mountains in western Ukraine. This sector has been in decline for decades because of excessive timber harvesting in the 1950s and 1960s. Consequently, Ukraine imports much of its lumber and paper. In 2005 only 16 percent of the total land area was forested. The fishing industry, once relatively well developed, experienced a sharp drop in productivity in the early 1990s and never recovered.

D

Mining

Ukraine ranks among the world’s largest producers of manganese and iron ores. Reserves of these minerals are located primarily in the south central Kryvyy Rih area. Ukraine is also among the world’s largest producers of bituminous coal (soft coal), which is concentrated in the Donets Basin of the southeastern Donets’k region. In the post-Soviet period, outdated equipment and inefficiency hampered the productivity of the mining sector, and the government shut down some coal mines.