Ukraine's economy keeps GDP at half EU's poorest

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Ukraine's economy keeps GDP at half EU's poorest

Ukraine's economy keeps GDP at half EU's poorest
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Queues at cash machines in Ukraine’s eastern city of Donetsk were snaking across pavements even before the president flew away.

Last week, among a lot of calm people, at least some still didn’t understand what had happened.

One woman said: “I am here because of the panic, but how panic started, I don’t know.”

A man said: “I saw the queue driving by, and thought I should take money out, since I saw that everybody was withdrawing. I don’t know.”

In the nation’s capital, Kyiv, outdoor vendors are also worried. While growth a few years ago posted five percent, the economy has been in recession since 2011, and things have got far rougher over the past three months of crisis.

One vendor said: “It’s hard, this economic difficulty. The biggest problem is the sharp drop of our national currency, the hryvnia. The exchange rates for the dollar and the euro have shot up.”

Ukraine’s GDP per person is one quarter that of Russia’s, and it is half the level in the poorest countries in the EU. The Yanukovych government refused to carry out reforms required by the International Monetary Fund as conditional for loans – loans that, according to analyst Olina Bilan, Chief Economist at Dragon Capital, Ukraine needs more each day.

Bilan said: “Definitely, for the markets and for Ukraine’s economy overall it would be much better if we got the IMF’s support, because IMF help will mean that the government, the authorities will make some reforms which will put Ukraine’s economy on a more sustainable footing, and Russian support will mean that we get the money and spend it to repay the gas imported from Russia.”

Russia agreed to help Ukraine to a level of around 11 billion euros last December, but Kyiv only got as far as receiving about a quarter of that, and the shape it’s in now has dashed expectations for the rest.

Valeriy Chalyi, a political analyst at the Razumkov Centre, said: “It is not a time to make a decision to take money from Russia. Maybe after that, after the Association Agreement [is signed with the EU], we [would] discuss with Russia, in new circumstances, how to cooperate, because Russia remains an important economic partner for Ukraine. But, definitely, it is a new situation.”

Kiev needs more than 25 billion euros to cover its obligations in the next two years. The first instalment of those payments is due this June.