Industries

In 1997, Ukraine derived 12% of its value-added from agriculture. This is relatively larger than that of other CEE economies (with the exception of Romania). Industry accounted for 40% of value-added. Services occupied the remaining 48%, which is relatively low by East European standards (though higher than in Romania). Given that one of the typical trends perceived in economic transition is a shift from agriculture and industry to services, the service sector in Ukraine should in the long run outperform other sectors of the economy and make up a higher percentage of overall GDP.

Metals (especially ferrous), food, mechanical engineering and power dominate Ukraine’s industrial output, while the more consumer oriented and labor intensive textiles and apparel sector account for only 1% of industrial output even despite comparatively low labor cost. Over recent years the country’s non-ferrous metals were the most robust in their growth rates, while textiles/apparel, wood/pulp/paper and food also exhibited consistent recovery trends.

Table: Ukraine’s Industry & Services

In current US$ millions
1997
UAH mil
Real
%ch
1998
UAH mil
Real
%ch
1999
UAH mil
Real
%ch
Industrial output
73,481
-1.8
82,862
-1.5
107,080
100%
4.3
Electricity
9,500
-2.6
12,182
-0.3
17,476
16%
6.6
Fuel
8,207
4.5
9,513
-0.7
12,231
11%
-1.3
Ferrous metals
17,072
7.7
19,131
-6.8
25,604
24%
6.2
Non-ferrous metals
1,067
2.7
1,285
12.4
2,226
2%
8.9
Chemicals/petrochemicals
4,816
-0.6
5,359
0.9
5,677
5%
-1.1
Mechanical engineering
11,331
-3.6
12,824
-4.5
14,801
14%
-0.8
Wood/pulp & paper
1,488
-5.1
1,416
10.4
2,296
2%
23.6
Construction materials
2,396
-7.9
2,762
4.1
3,327
3%
-0.6
Textiles/apparel
1,235
-5.2
1,269
1.5
1,538
1%
5.7
Food
12,556
-14.6
12,413
-0.5
16,301
15%
7.8
Construction
N/A
-11.9
7,662
2.6
-10
Transport/
Communications
N/A
-1.9
23,295
-2.6
-6

Source: State Statistics Committee, Flemings/SARS Consortium.

Ukraine derives the majority of its export earnings from selling primary products like metals, chemicals and agricultural commodities (over half of merchandise exports). At the same time, the majority of import spending is also centered around primary products (esp. energy and chemicals). Surplus service trade (mostly from pipeline transport of oil and gas) partially offsets the deficit in merchandise trade caused by excessive energy consumption of Ukraine’s economy. The drastic real depreciation of the local currency in 1998-99 has caused a rebalancing of Ukraine’s trade by depressing imports. For 1999, Ukraine is expected to post a surplus on its current account.

Table. Trade Patterns.

In current US$ millions
Y1996
Y1997
%ch vs 96
Y1998
%ch vs 97
Current Account
- 1,185
- 1,335
13%
- 1,190
-11%
Merch exports
15,547
100%
15,418
100%
-1%
13,153
100%
-15%
Energy
1,156
7%
1,142
7%
-1%
992
8%
-13%
Metals
4,628
30%
5,904
38%
28%
5,428
41%
-8%
Chemicals
2,207
14%
2,015
13%
-9%
1,835
14%
-9%
M.Engineering
2,081
13%
1,970
13%
-5%
1,948
15%
-1%
Agri/Food
3,045
20%
1,802
12%
-41%
1,166
9%
-35%
Other
2,430
16%
2,585
17%
6%
1,785
14%
-31%
Merch imports
- 19,843
100%
- 19,623
100%
-1%
- 15,836
100%
-19%
Energy
- 8,868
45%
- 8,280
42%
-7%
- 5,573
35%
-33%
Metals
- 760
4%
- 666
3%
-12%
- 710
4%
7%
Chemicals
- 1,954
10%
- 2,151
11%
10%
- 1,942
12%
-10%
M.Engineering
- 2,990
15%
- 3,687
19%
23%
- 3,394
21%
-8%
Agri/Food
- 1,447
7%
- 898
5%
-38%
- 1,042
7%
16%
Other
- 3,824
19%
- 3,941
20%
3%
- 3,174
20%
-19%
Balance of Merch Trade
- 4,296
- 4,205
-2%
- 2,683
-36%
Service exports
4,799
100%
4,937
100%
3%
4,226
100%
-14%
Transport
4,034
84%
4,029
82%
0%
3,235
77%
-20%
incl. Pipeline transit
2,955
62%
2,908
59%
-2%
2,231
53%
-23%
Travel
230
5%
270
5%
17%
297
7%
10%
Financial
26
1%
33
1%
27%
23
1%
-30%
Communications
125
3%
114
2%
-9%
99
2%
-13%
Construction
42
1%
50
1%
19%
44
1%
-12%
Other
343
7%
441
9%
29%
527
12%
20%
Service imports
- 1,625
100%
- 2,268
100%
40%
- 2,472
100%
9%
Transport
- 424
26%
- 476
21%
12%
- 501
20%
5%
Travel
- 308
19%
- 305
13%
-1%
- 321
13%
5%
Financial
- 42
3%
- 80
4%
90%
- 94
4%
18%
Communications
- 119
7%
- 115
5%
-3%
- 124
5%
8%
Construction
- 109
7%
- 192
8%
76%
- 218
9%
14%
Other
- 623
38%
- 1,100
49%
77%
- 1,214
49%
10%
Balance of Service Trade
3,174
2,669
-16%
1,754
-34%
Income balance
- 572
- 644
13%
- 909
41%
Transfer balance
509
845
66%
648
-23%

Source: NBU, Flemings/SARS Consortium.