Ukraine posted zero economic growth over 2012 and 2013 because serious macroeconomic and structural weaknesses remain unaddressed. A combination of de-facto fixed exchange rate policy, loose fiscal policy together with considerable quasi-fiscal subsidies in the energy sector has led to further widening of the budget and the external imbalances and threatens sustainability. Read More »
Top concerns for Ukraine now are the developments in the Euro zone and the state of the global economy together with resolution of the political crisis in the country. Confidence in the government and the state institutions is low. Economic growth remained weak for the last two years. After five consequent quotes of economic slowdown started in the second half of 2012, Ukraine’s GDP posted growth of 3.7 percent y/y in 4Q2013 driven by good harvest and low statistical base. This brought FY GDP growth to 0.0 percent (after 0.2 percent in 2012). Performance of the key sectors remained week due to weak external conditions and delays in domestic policy adjustment.
Economic growth is expected to recover slightly in 2014, however the risks for this forecast are still substantial. On external side, the main risk is a protracted crisis in Europe, leading to lower demand for exports and more difficult access to global capital markets. Domestically, the main risk is a failure to implement macroeconomic rebalancing (preferably anchored in a program with the IMF). Delays in macroeconomic adjustment could mean that the forced adjustment will be much sharper. Ukraine’s access to financing is already limited by investor concerns over the sustainability of its macro framework, political situation and the poor investment climate.
To support the banking industry, World Bank is actively working with the Government and the National Bank of Ukraine and other financial regulators on strengthening the policy and regulatory role of the state in the financial sector, while consolidating state ownership of financial institutions.
Evidence shows Ukraine is facing a health crisis, and the country needs to make urgent and extensive measures to its health system to reverse the progressive deterioration of citizens’ health. Crude adult death rates in Ukraine are higher than its immediate neighbors, Moldova and Belarus, and among the highest not only in Europe, but also in the world.
The unemployment rate increased to 9.5 percent at the beginning of 2009 as a result of the global financial crisis, and today stands at 7.5 percent. While firms in the country face a shortage of skilled workers, many university graduates can’t find employment or end up in jobs that do not use their skills due to skills mismatch.
Literacy and school enrollment rates are high in Ukraine. However, larger budget allocations to education have not resulted in improvements in the quality of education. Ukraine’s priority should be to make better use of the resources allocated for the sector by significantly downsizing the school network to fit the smaller (current and projected) cohorts of students.
Ukraine has tremendous agricultural potential and could play a critical role in contributing to global food security. This potential has not been fully exploited due to depressed farm incomes and a lack of modernization within the sector. The establishment of a legal framework for secure land ownership, development of an efficient registration system, and ensuring free and transparent land markets are important elements of a policy framework that could facilitate agricultural development in Ukraine.
Ukraine’s road safety record remains one of the worst in Europe in terms of road accidents and fatalities. Substantial portions of the network need upgrading to European technical and safety standards. Improving the efficiency of the transport sector could play a role in raising economic competitiveness.
Ukraine is one of the most energy inefficient countries in the region and restructuring and upgrading its energy sector continues to be one of the key development challenges for the Government. The sector faces problems maintaining security, reliability and quality of supply due to delays in energy sector reform, poor financial condition of energy sector enterprises, lack of investments, and deferred maintenance in aging infrastructure. These factors threaten the sustainability of economic growth, degrade the environment and increase the cost of social services. Improving them is among Ukraine’s top strategic priorities.
The municipal and services sector in Ukraine suffers from decades of underinvestment and poor maintenance. The need to invest in water and wastewater utilities is growing dramatically and the existing low tariff levels are a major limitation to the sustainability of utilities. The need for rehabilitation is exacerbated by the overall high energy consumption in water production and wastewater treatment. Improving service delivery through rehabilitation of infrastructure and promotion of energy efficiency solutions offers the possibility of driving utilities towards financial sustainability while providing improved services.
Last Updated: Feb 17, 2014
The World Bank's Country Partnership Strategy (CPS) for Ukraine for 2012-2016, endorsed by the World Bank's Board of Directors in February 2012, is targeting implementation issues by aiming to strengthen the relationships between the state, citizens and business.
The first pillar focuses on improving public services, enhancing sustainability and efficiency of public finances, and promoting a more transparent and accountable use of public resources.
The second pillar focuses on improvements in the business climate and the promotion of domestic and foreign investments, as well as competitiveness and job creation.
The new Strategy aims to deliver concrete results and help the government build trust. The Strategy is based on a careful diagnostic of underlying risks, both technical and governance related and an analysis of past experience.
The current investment lending portfolio includes 11 operations for a total amount of US$ 1.8 billion. Since Ukraine joined the World Bank in 1992, Bank commitments to the country total about US$ 7 billion for 39 projects and programs.
Expanding the Ukrainian Power Transmission Grid Ukraine has one of the largest power transmission systems in Europe, and one of the oldest. Over two thirds of the country's almost 30,000 km of transmission lines and 132 substations have exceeded their expected lifespan. Working with the World Bank, the state-owned UkrEnergo is modernizing its assets to make its grid transmit more power while wasting less in the process.
Under the project, UkrEnergo will rehabilitate seven substations in various regions of the country, helping to reduce energy losses by about 33 GWh per year and decreasing maintenance and repair costs by about US$ 800,000 a year. Since a typical 25-story office building consumes 5 GWh per year, the savings are equal to the power used by seven skyscrapers in a large city.
If modernization in the energy sector succeeds, Ukraine's electricity grid will be a reliable part of the European grid. That will give Ukraine more opportunities to have income from Western European markets, where the price of electricity is higher than in Ukraine.
Safer and Cleaner Power from Ukraine’s Hydroelectric Plants
Hydroelectric stations provide electricity, drinking water, and protect millions of people from possible floods. For that reason, most hydropower stations in Ukraine have been built in densely populated areas, with each reservoir holding millions of cubic meters of water that needs to be controlled.
Unfortunately, not all dams are adequately maintained. With support from the World Bank's Hydropower Rehabilitation Project, UkrHydroEnergo, which manages the Ukrainian power grid, is increasing the safety and efficiency of its hydroelectric plants, as well as their capacity. The state-owned company operates nine hydroelectric stations on the Dnieper and Dniester rivers with a total capacity of 3,900 megawatts.
Working closely with ecologists, plant engineers regulate the levels of water in reservoirs, since every artificial lake provides drinking water to thousands of cities and villages, and is also used for irrigation—both in Ukraine, and in neighboring Moldova. When modernized, the hydropower stations will significantly improve their reputation as green and renewable energy sources, with low levels of greenhouse gas emissions.
Efficiency is important, too. About 50 new turbines have been replaced at nine hydroelectric plants.
Kiev: Bringing an Ancient City into the Future One of the oldest cities in Eastern Europe, Kiev was founded on one of the ancient world's most important trade routes, running from the Baltic region south to what is now Turkey. Kiev's leaders hope to use the city's historic culture and stately old buildings to invigorate its future. The idea is to build a new modern city on top of an ancient one, bringing the best of both together.
Supported by the World Bank with a grant from the Cities Alliance and their partners, the Kiev City Development Strategy aims to make Kiev a livable, healthy city with ample green space by reducing traffic and congestion, building bike routes and promoting energy efficiency. Urban leaders also want to attract new businesses and encourage young workers to invest in the city. And since Ukraine allows visa-free entrance for citizens of both Europe and the Commonwealth of Independent States, the city could become an ideal destination for international businesses and organizations.
Another part of the city strategy focuses on raising public and private investments in health care, and promoting healthy living. A long-term goal is to increase longevity of the Ukrainian people by at least 10 years.
Ukraine's Social Safety Net Works Better to Serve the Neediest The Ukrainian social safety net is going through radical changes in order to better serve beneficiaries. In 2006, Ukraine's Government, with the assistance from the World Bank, started to modernize the system by training staff at 756 local welfare offices and equipping them with modern computer systems.
The guiding principle is the one-stop-shop. Individuals can get all the benefits they qualify for in a single application and by providing one package of documents. At their first visit to a welfare office, applicants are informed of all the documents they will need to collect. Once they have filled out and handed in the paperwork, they receive their benefits from the local welfare office within 10 days.
This new business model has been developed and implemented in nearly all of the 756 local welfare offices in the country. Over 90 percent of welfare offices have been refurbished and modernized. Better management information systems have reduced the time needed to process new applications for benefits from over four hours to under two, allowing staff to process more benefits every month.