The blow to the Ukrainian economy has been horrendous. In January, industrial production fell by no less than 34 percent over January 2008, and GDP is estimated to have plunged by 20 percent. Steel production, mining and construction have fallen by half. In current dollars, Ukraine’s GDP is likely to plummet by 40 percent this year. Exports are likely to drop by half, and imports even more, reducing the current account deficit to an insignificant level. Millions of workers are being laid off, and the stock market has contracted by 90 percent.
No other country has been hit as hard as Ukraine, and it needs all the support it can get to mitigate the social shock. The Ukrainian government reacted swiftly, asking the International Monetary Fund for support last October. Within four weeks, Ukraine and the IMF had agreed on a large, strong two-year standby agreement with $16.4 billion of IMF credits.
Economy: Round Up
Kyv Post reports on the drop in wages since December. There has also been a rise in unpaid wages, while auto demand in Ukraine falls. NBU temporary head says non-economic reason explain drop in the currency.
Anders Aslund writes that he does not think that Ukraine will default, though he notes that there is much cause for concern. Aslund also notes that the IMF demand to float the currency explains the drop in the hryvnia. He claims that the bickering between the president and prime minister explain fears of default.
Multilateral lenders also realize that the central and eastern European countries need assistance. They plan to loan €24.5bn to the banking sector in this region, reports FT Alphavile. Also, The Economist has a an article that recaps what's been happening in Ukraine.
An excerpt below from the Aslund article describing the the economic situation in Ukraine. (here's the full article)
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