Ukraine has a developing social market economy. It possesses many of the components of a major European economy, such as rich farmlands, a well-developed industrial base, highly-trained labour, and a well-funded education system. It has large mineral deposits across its landmass. Ukraine remains one of the poorest countries in Europe, which some have attributed to high corruption levels and the slow pace of economic liberalisation and institutional reform.
The nation was in an economic depression during the 1990s with hyperinflation and an output half of its predecessor state, the Ukrainian SSR. Economic growth returned in 2000, lasting until the 2008–2009 Ukrainian financial crisis. The country fell into another recession in 2013, with stricter border and customs control by Russia straining their exports. Its relationship with Russia has significantly influenced its economic development. The 2014 Russian annexation of Crimea and war in Donbas severely damaged two of Ukraine's most industrial regions. The Russian invasion of Ukraine in 2022 suppressed economic growth by 18.9% that year, with the economy rebounding from 2023 to 2026.
History Before 1917
Geography has long influenced the economy of the Ukrainian lands. Rich fertile soils (such as chernozem areas) made the area a "breadbasket": for ancient Greece as well as for early modern Europe. The maintenance of trade corridors – the route from the Varangians to the Greeks and access through the Straits to the Mediterranean world – became important. Mineral resources encouraged industrialisation – notably in the Donbas – from the 19th century onwards.
The lack of secure borders meant repeated interruptions in economic development. Steppe nomads and other conquerors – Cumans, Mongols, Tatars for example, sometimes saw plundering as more important than fostering economic development. In the 16th to 18th centuries, the wastelands of the Wild Fields left much of Ukraine as an area of tentatively militarised outposts, prior to tsarist Russia's extension of its power into the region in the 17th and 18th centuries.
Soviet period: 1917 to 1991
1991 to 2000 On 24 August 1991, Ukraine established its independence from the Soviet Union. The new state's economy suffered huge output declines and soaring inflation in the following years. Ukraine saw hyperinflation in the early 1990s because of a lack of access to financial markets and massive monetary expansion to finance government spending, while output declined sharply this was catastrophic for the economy because it undid decades of hard-fought economic progress and people became poorer. Huge output declines and soaring inflation was at the time common to most former Soviet republics, but Ukraine was among the hardest hit by these problems.
In response to hyperinflation the National Bank of Ukraine replaced the national currency, the karbovanets, with the hryvnia in September 1996 and pledged to keep it stable in relation to the U.S. dollar.President's Decree dated 26 August 1996, published on 29 August The currency remained unstable through the late 1990s, particularly during the 1998 Russian financial crisis.
Deep recession during the 1990s led to a relatively high poverty rate, but beginning in 2001, seven straight years of economic growth, raised the living standard for most citizens. A World Bank report in 2007 noted that: "Ukraine recorded one of the sharpest declines in poverty of any transition economy in recent years. The poverty rate, measured against an absolute poverty line, fell from a high of 32% in 2001 to 8% in 2005." The UN noted that Ukraine had overcome absolute poverty, and that there was only relative poverty in 2009.
2000 to 2014
Ukraine stabilised by the early 2000s. The year 2000 saw the first year of economic growth since Ukraine's independence. The economy continued to grow thanks to a 50% growth in exports between 2000 and 2008 – mainly exports from the traditional industries of metals, metallurgy, engineering, chemicals, and food. Between 2001 and 2008, metals and chemicals prices boomed because of fast international economic growth, while the price of natural gas imported from Russia remained low.
Monetisation also helped to drive the economic boom Ukraine experienced between 2000 and 2008. Attracted in part by relatively high interest-rates, foreign cash was injected into Ukraine's economy and money supply grew rapidly: from 2001 to 2010 broad, money increased at an annual rate of 35%. In 2006 and 2007, credit growth averaged 73%.
An effect of this was that Ukrainian assets began to look like a large economic bubble and high inflation started to damage Ukraine's export competitiveness. The ratio of credit to GDP grew extremely fast – from 7% to almost 80% over just several years. From 2000 to 2007, Ukraine's real growth averaged 7.4%. This growth was driven by domestic demand: orientation toward consumption, other structural change, and financial development.
Domestic demand grew in constant prices by almost 15% annually. It was supported by expansionary—procyclical—fiscal policy. Ukraine benefited from very low labour costs, slightly lower tariffs, and high prices of its main export goods, but at the same time faced notably higher non-tariff barriers. Russia has not charged Ukraine below-world-market prices for natural gas since the end of 2008. This led to various Russia–Ukraine gas disputes.
Ukraine suffered severely in the economic crisis of 2008. Because of it Ukraine experienced a drought in capital flows. The hryvnia, which had been pegged at a rate of 5:1 to the U.S. dollar, was devalued to 8:1, and was stabilised at that ratio until the beginning of 2014. In 2008, Ukraine's economy ranked 45th in the world according to GDP (nominal), with a total nominal GDP of US$188 billion, and nominal per capita GDP of US$3,900. There was 3% unemployment at the end of 2008. Over the first 9 months of 2009, unemployment averaged 9.4%. The final official unemployment rates for 2009 and 2010 were 8.8% and 8.4%, although the CIA World Factbook notes a "large number of unregistered or underemployed workers". Ukraine's GDP fell by 15% in 2009.
The Ukrainian economy recovered in the first quarter of 2010 due to the recovery of the world economy and increasing prices for metals. Ukraine's real GDP growth in 2010 was 4.3%, leading to a per capita PPP GDP of US$6,700. In 2011, Ukrainian politicians estimated that 40% of Ukraine's economy was a shadow economy.
In the summer of 2013, Ukrainian exports to Russia fell substantially due to Russia's stricter customs controls.
By October 2013, the Ukrainian economy had become stuck in recession. Moody's downgraded Ukraine's credit rating to Caa1 (poor quality and very high credit risk) in September 2013. At the time, swap markets rated Ukraine's default probability over the next five years at 50%. In 2013, Ukraine saw no growth in GDP.
Post-Euromaidan: 2014 to 2022 Due to the loss of Ukraine's largest trading partner, Russia, over the annexation of Crimea in March 2014, and exacerbated by the war in Donbas which started in April 2014 Ukraine's economy shrank by 6.8% in 2014. It had been expected to decline by 8%. A Ukrainian government report stated early in February 2016 that Ukraine's economy had shrunk by 10.4% in 2015. For 2015, the National Bank of Ukraine had expected a further decline of 11.6%, and the World Bank anticipated a 12% shrinkage. The World Bank forecast growth of 1% in 2016.
Early in February 2014, the National Bank of Ukraine changed the hryvnia into a fluctuating/floating currency in an attempt to meet IMF requirements and to try to enforce a stable price for the currency in the Forex market. In 2014 and 2015, the hryvnia lost about 70% of its value against the U.S. dollar.
The IMF agreed to a four-year loan programme worth about $17.5 billion in eight tranches over 2015 and 2016, subject to conditions which involved economic reforms. However, due to lack of progress on reforms, only two tranches worth $6.7 billion were paid in 2015. A third tranche of $1.7 billion was provisionally scheduled in June 2016 subject to the bringing into law of 19 further reform measures. Some western analysts believed that large foreign loans were not encouraging reform, but enabling the corrupt extraction of funds out of the country.
Since December 2015, Ukraine has refused to pay and hence de facto defaults on a $3 billion debt payment to Russia that formed part of a December 2013 Ukrainian–Russian action plan.
The turnover of retail trade in Ukraine in 2014 shrank by 8.6% (from 2013) and shrank by 20.7% in 2015 (from 2014). Ukraine saw a 30.9% decline in exports in 2015, mainly because of a sharp decline in production output in Donetsk Oblast and in Luhansk Oblast (the two regions of the Donbas). These two regions were responsible for 40.6% of the total export-decline rate. Before the war they had been two of the more industrial oblasts of Ukraine.
According to the Ministry of Economic Development and Trade, Ukraine had a surplus in its balance of payments in January–November 2015 of $566 million and has had a trade deficit of $11.046 billion during the same period in 2014. On 31 December 2015, Ukraine's public debt stood at 79% of its GDP. It had shrunk $4.324 billion in 2015 to end up at $65.488 billion. But calculated in hryvnia, the debt had grown by 42.78%. In 2015, the Ministry of Social Policy of Ukraine rated 20–25% of Ukrainian households as poor.
$2.526 billion entered the Ukrainian economy via remittances in 2015, 34.9% less than in 2014. $431 million was sent from Ukraine to elsewhere using remittances. In January 2016, Bloomberg rated Ukraine's economy as the 41st most innovative in the world, down from 33rd in January 2015.
In May 2016, the IMF mission chief for Ukraine, Ron van Rood, stated that reduction of corruption was a key test for continued international support. In February 2016, historian Andrew Wilson assessed progress in reducing corruption as poor as of 2016. Aivaras Abromavičius, Ukraine's then-Minister of Economy and Trade, resigned in February 2016, citing ingrained corruption. In October of the same year, a survey of potential foreign investors conducted by Dragon Capital identified corruption and lack of trust in the judiciary as the largest obstacles to investment.
Late in July 2016, the State Statistics Service of Ukraine reported that, compared with June 2015, real wages had increased by 17.3%. Simultaneously the National Bank of Ukraine reported a $406 million surplus in Ukraine's January–June 2016 balance of payments against a deficit of $1.3 billion in the same period in 2015. According to Ukraine's State Statistics Service, inflation in 2016 came down to 13.9%; while it had stood at 43.3% in 2015 and at 24.9% in 2014.
The Economist has compared the severity of Ukraine's recession to that of the Greek recession in 2011–2012 – pointing to Ukraine experiencing an 8–9% decline in GDP from 2014 to 2015 and Greece experiencing an 8.1% decline of GDP in 2011–2012, and noted that not all areas of Ukraine were equally effected by the economic downturn. Donetsk and Luhansk (the conflict zone) saw industrial production falling by 32% and 42% respectively. On the other hand, Lviv, located over 1000 km from the conflict, posted the largest jump in employment in the nation.
The economy of Ukraine has overcome the severe crisis caused by armed conflict in the eastern part of country. A 200% devaluation of the hryvnia in 2014–2015 made Ukrainian goods and services cheaper and more competitive. In 2016, for the first time since 2010, the economy grew by more than 2%. A 2017 World Bank statement projected growth of 2% in 2017, of 3.5% in 2018, and of 4% in 2019 and 2020. Inflation in Ukraine in 2017 was 13.7% (12.4% in 2016).