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The largest increase in gross value added in January—August occurred in industry (it accounted for 12.0%), in trade and public catering (6.1%) and construction (3.5%). First time since the beginning of the year the increase in gross value added in the agricultural sector was observed. In accounted for 1.9%.

Compared to the respective period of 1999 the volume of consumer goods produced in January—August 2000 increased by 29.6%. Production of consumer foodstuffs, alcoholic beverages and non-foodstuff increased by 25.4%, 24.1% and 33.0% respectively.

Non-governmental enterprises contracted 82.4% of the overall volume of construction work. In January—August the increase in contract work by these enterprises was 5.5% while the 9.4% decline in contract work by state-owned enterprises was observed.

Product	All categories of enterprises		Including private sector
	January—August	2000 as % of 1999	January—August	2000 as % of 1999
Meat (in live weight), thousand tons	1578.8	100.7	1098.7	102.3
Milk, thousand tons	8888.1	93.0	6179.0	103.5
Eggs, million	6417.6	98.5	4448.6	101.6
Wool, tons	3126.0	88.5	1881.0	99.2

Livestock	All categories of entities		Including private sector
	January—August	2000 as % of 1999	January—August	2000 as % of 1999
Cattle	10208.8	85.4	4371.0	101.0
including cows	5114.5	88.1	3070.2	101.2
Pigs	9259.5	81.9	6172.1	95.4
Sheep and goats	2014.5	92.9	1528.4	100.1
Poultry	145892.0	92.3	119839.0	97.7

Since the beginning of the year the railroad shipment of goods totaled 190.4 million tons. There was a 4.4% increase.

Motor transport enterprises delivered 65.0 million tons of cargo to the customers. The rate of decrease was 15.6%. At the same time the freight turnover increased by 15.7% and reached 3.4 billion ton-kilometers.

Main pipelines transported 146.2 million tons of freight. It is by 5.2% less than in the respective period of the previous year. Transit of freight decreased by 4.3% in general. Transit of gas and ammonia decreased by 9.0% and 10.4% respectively; oil transportation decreased by 6.0%.

The national marine and river trade fleet increased cargo operations by 6.8%; the freight turnover decreased by 8.0%.

The volume of freight handled in commercial and fishing ports and at industrial terminals increased in the course of the first eight months of the current year by 3.3% compared to the respective period of the previous year. It has reached 64.5 million tons due to the increase in import freight traffic by 1.5 times and the increase in transit cargo traffic and in internal deliveries by 6.0% and 14.9% respectively. The volume of export freight handled in the ports decreased by 6.0%. The volume of freight handled in fishing ports reduced by 5.0%. The volume of freight handled in sea ports increased by 4.0%. The number of the serviced vessels (foreign and chartered by foreign freighters) exceeded by 7.2% the level of the respective period of the previous year. They accounted for 6.6 thousand.

Public passenger vehicles transported 1.7 billion passengers. The passenger turnover totaled 51.8 billion passenger-kilometers. This is respectively by 6.7% less and 2.4% more than the level in January—August of the previous year.

The biggest amount of export deliveries was to the Russian Federation (22.8% of the overall exports), Turkey (6.2%), the USA (6.0%), Germany (5.4%), China (4.8%), Italy (4.2%), Poland (3.3%) and Bulgaria (3.2%).

The highest percentage of the overall volume of Ukrainian imports came from the following countries: the Russian Federation — 45.1% of the overall imports, Germany — 7.3%, Turkmenistan — 5.4%, Bilorus — 4.4%, Italy — 2.6%, the USA — 2.5%, Kazakhstan — 2.2% and Poland — 2.1%.

Compared to the respective period of 1999 the share of ferrous metals in the overall amount of exports in January—July 2000 increased from 32.8% to 37.3%; the share of fertilizers increased from 2.6% to 2.8%, of aluminum and products made of aluminum — from 3.2% to 3.7%, of ore, slag and ashes — from 2.9% to 3.3%. At the same time the percentage of grain crops in the overall amount of exports reduced from 4.8% to 0.4%, of oil-bearing seeds and fruit — from 1.5% to 1.1%, of fabrics and textile — from 2.9% to 2.5%. The share of means of land, air and water transport in the overall volume of exports decreased from 3.8% to 2.8%.

The share of mechanical and electric machinery and equipment in the overall imports increased from 12.4% to 14.3%, the share of products of plant origin rose from 1.4% to 2.6%, the share of goods purchased in the ports increased from 0.7% to 2.1%. The percentage of products of chemical and related industries fell from 6.8% to 5.9%, the share of food industry products reduced from 3.8% to 2.9%, the share of means of land transport (excluding railway) in the overall imports decreased from 3.7% to 3%.

The shares of barter operations in the overall volume of Ukrainian exports and imports were 1.9% and 1.5% respectively (in January—July 1999 they accounted for 4.5% and 3.8% respectively).

The increase in prices established by manufacturers was 0.7% in August. Since the beginning of the year it accounted for 14.2%.

Industry total	100.7	114.2
Industry	August 2000 compared to
	July 2000	December 1999.
Industry total	100.7	114.2
Power industry	100.2	102.2
Fuel industry	101.1	119.9
Ferrous metallurgy	100.2	109.1
Non-ferrous metallurgy	98.7	107.5
Chemical and petrochemical industry	100.3	118.7
Machine-building	101.2	111.7
Woodworking and pulp-and-paper industry	100.3	107.7
Construction materials industry	102.6	115.1
Light industry	101.5	112.9
Food industry	101.3	123.0
Flour-and-cereals and animal formula feed industry	99.9	163.5

Item	Consolidated budget		Including the State Budget
	In January—July	as % of GDP	In January—July	as % of GDP
Total revenues	24605.3	28.1	17999.0	20.6
including
Tax revenues — total	16088.9	18.4	10087.8	11.5
including:
enterprise profit tax	3988.3	4.6	2882.9	3.3
personal income tax	3164.1	3.6	0.0	0.0
payment for land	664.9	0.8	—	—
value-added tax	4932.7	5.6	4932.7	5.6
excise tax	1071.6	1.2	1011.3	1.1
local taxes and fees	271.2	0.3	—	—
Non-tax revenues — total	5911.7	6.8	5040.7	5.8
including:
receipts from privatization	1284.5	1.5	1179.1	1.4
receipts of depreciation charges	144.7	0.2	144.7	0.2
state duty	153.3	0.2	101.2	0.1
State target funds	2568.7	2.9	2166.9	2.5
Total expenditures	23554.9	26.9	17181.7	19.7
including expenditures on:
state administration	1756.6	2.0	1377.3	1.6
law enforcement activities and ensuring security of the state	1381.5	1.6	1258.5	1.5
social and cultural establishments and activities	9655.8	11.0	3862.3	4.4
industry, power generation and construction	1490.8	1.7	1167.9	1.3
agriculture, forestry, fishing and hunting	343.7	0.4	153.6	0.2
transport, roads, communications, telecommunications and computer science	922.4	1.1	234.3	0.3
housing and public utilities	478.9	0.5	0.9	0.0
national defense	1143.6	1.3	1139.9	1.3
Chornobyl relief fund	900.6	1.0	900.6	1.0
government specialized funds	1125.4	1.3	1051.4	1.2
Excess of receipts over expenditures	1050.4	1.2	817.3	0.9

Compared to June 2000 the real wages increased by 4.1% in July. During 7 months real wage index as percentage of the respective period of the previous year accounted for 97.2%. During the last 12 months the level of real wage decreased by 3.7%.

Since April 10, 2000 the NBU established a discount rate at the level of 29% and a lombard rate at the level of 34%; since August 15 these rates account for 27% and 30% respectively.

In January—July the resources of commercial banks increased by 34% due to the increase in the amount of deposits by enterprises an population (deposits in national and foreign currency increased by 41% and 25% respectively). Debts on credits provided by commercial banks to the economic entities increased by 30% during 7 months of the current year (debts on credits in national currency increased by 46%, debts on credits in foreign currency rose by 14%).

The increase in money supply and the decrease in the NBU’s discount rates have positively affected the dynamics of the interest rates on credits provided by commercial banks. During 7 months they decreased from 44.4% per annum to 31.5% per annum at early August.

Despite the favorable situation that made it possible for the NBU to make large-scale purchasing of hard currency at the Interbank foreign exchange market (during 8 months of this year the NBU purchased nearly $1.2 billion), as of September 20, 2000 the gross hard currency and gold reserves amounted to only $1.119 billion, including liquid funds for the amount of $1.012 billion (at the beginning of the year the gross reserves accounted for $1.23 billion). The size of reserves is by 3–3.5 times less than minimum required according to the international criteria in force.

In January—July 40 auctions for placing Bonds of internal government loan (BIGLs) in the primary market were held. The budget receipts from these auctions amounted to UAH 1.706 billion. The volume of BIGLs placed in the secondary market amounted to UAH 2.283 billion.

The average official hryvnia exchange rate to US dollar was UAH 542.10/USD 100 in the second quarter of 2000. In July it was UAH 543.86/USD 100.

As of August 1, 2000 the population of Ukraine was 49.4 million. Since the beginning of the year the population decreased by 262.9 thousands or by 0.5%. The main reason for decreased population is natural reduction (the natural decline in population was 238.5 thousand). The increase in the natural reduction of population was caused by the increase in the death rate at the same time with the decrease in the birth rate (the number of newborns per 1,000 of population was 7.7; the number of the deceased was 15.9 per 1,000 of people).

It is significant that the economic growth is most intensive in those industries where the privatization process has begun earlier than in other ones and the enterprises were fully privatized. One may see sure signs that privatization creates conditions for the general financial recovery of the Ukrainian economy and gradual getting over the global crisis of payments. This crisis is a direct result of the slow rates of implementation of structural and institutional reforms in the country.

We have reasons to state that during the last one-year or two the attitudes of the economic entities operating in the government and non-government sectors of economy towards their commitments significantly differed. Payments of the economic entities to the budget may serve as a good example of these fundamental differences.

Despite the fact that the percentage of the enterprises of the government sector (both their share in the total number of enterprises and their share in the overall volume of production output) is constantly decreasing. Their “contribution” to the amount of non-payments to the budget increases both absolutely and statistically.

The share of the state-owned enterprises in the overdue creditor indebtedness to the budget increased from 28.5% to 61.2% in 1999—2000. From January to July 2000 it rose to 63%.

Since the middle of 1999 the transformation of the government sector into the major “generator” of budget arrears becomes obvious.

Between May 1, 1999 and July 1, 2000 the creditor indebtedness to the budget of the state-owned enterprises increased from UAH 8.683 billion to UAH 13.4 billion, debts to the budget of the privatized enterprises grew up from UAH 8.578 billion to UAH 10.11 billion (or these debts increased by 54.3% and 17.9% respectively).

The past creditor indebtedness of the state-owned enterprises due to the budget increased from UAH 6.429 billion (as of May 1, 1999) to UAH 10.568 billion (or by 64.4%). The privatized enterprises’ past debts due to the budget increased from UAH 5.957 billion to UAH 6.196 billion, or only by UAH 238.9 million (4%).

The indebtedness of the state-owned enterprises accounts for 94.5% of the overall increase in the past creditor indebtedness during the period from May 1, 1999 to July 1, 2000.

The dynamics of the debt of the budget to economic entities have another pattern. Between May 1,1999 and July 1, 2000 the budget debt to the state-owned enterprises increased by 19.6%, the budget debt to non-governmental enterprises grew up by 82.5%.

Against the background of the irresponsible attitude of the state-owned enterprises towards the payments to the budget and much more positive behavior of the non-governmental sector the budgetary policy is still aimed at the support of the governmental sector and, in fact, discriminates the “de-statized” enterprises.

According to the data of the State Property Fund of Ukraine (SPF), the privatized enterprises much better meet their liabilities for settlement with counteragents and commercial banks (Report of the SPF on the implementation of the State Privatization Program for 1999. K., 2000). In 2000 some studies have been conducted which proved that the privatized enterprises were more actively reducing the wage arrears than the state-owned ones (studies of the Center for Market Reforms, Kyiv).

All these gives grounds to say that privatization creates conditions necessary for successful getting over the payment crisis and general improvement of the economic situation.

However, it would be untimely to state that the institutional prerequisites sufficient for the performance of the market economy had been already created. Privatization and restructuring of the production are undoubtedly the important factors of the current economic growth though the momentary advantages and transient factors still play more important role.

Financial resources of the enterprises in some industries of national economy were formed at the expense of the outflow of the working capital from the other industries. This caused the economic growth in some industries and decrease in production in other ones. The enterprises of the fuel and energy sector are major donors for economy (during the first eight months of the current year the fuel industry decreased production by 9.6%). The outflow of the working capital from the agricultural sector caused (to a considerable extent) the economic growth in food industry and some other processing industries against the background of the stagnating agricultural production.

During 9 months since the beginning of the economic experiment at the enterprises of the mining sector the ferrous metallurgy that is the leading industry of the national economy (it accounts for nearly 30% of the overall production output and more than 45% of export proceeds) got privileges concerning payment of taxes and duties to the budget for the total of UAH 3.4 billion. In addition, the debtor indebtedness accounts for 70% of the working capital of the enterprises participating in the experiment and debts of the budget to them make 14% of the working capital. That is, the working capital of the ferrous metallurgy is formed mostly at the expense of the enterprises of other industries and the budget.

Free of charge unauthorized intake and consumption of Russian gas by the Ukrainian consumers is one of the major factors contributing to the growth of the financial resources of the Ukrainian enterprises. During 7 months of the current year national enterprises have unlawfully taken and consumed Russian gas for the amount of $700 million, or nearly UAH 3.8 billion. (The importance of this factor for the general growth of the Ukrainian economy is confirmed by the fact that the total amount of unauthorized consumption of Russian gas exceeded the increase in the debts on credits granted by commercial banks to the economic entities. The latter accounted for UAH 3.5 billion during 7 months).

Starting from September—October the effect of such factor for showing economic growth as a favorable statistic base for comparison is coming to nil.

Acceleration of inflation rate decreases the solvency of the internal market and devaluates the financial resources of enterprises. The slowdown of inflation in June—August was seasonal. In September a new escalation of inflation was observed (inflation increased by 2.6% in September and since the beginning of the year inflation increased by 21.6% compared to 1.4% and 10.1% in the respective periods of 1999).

Some increase in real incomes of population was achieved by complete settlement of arrears of pensions. Actual gross payroll continues to decrease (compared to the respective period of 1999 it decreased by 2.8% throughout 7 months of 2000; between July 1999 and July 2000 inflation decreased by 3.7%). Arrears of wages are almost not decreasing (as of September 10, 2000 arrears of wages accounted for UAH 6.31 billion and decreased by only 1.4% since the beginning of 2000). This undermines the stimulating function of remuneration of labor and limits the solvency of the working population.

Too slow rate of devaluation of hryvnia under conditions of unpredictable high internal prize increase reduces the possibilities for internal accumulation of money associated with foreign trade. In the first half of 2000 positive balance of foreign trade in commodities and services ($679.9 million) was almost two times less than the same indicator in the first half of 1999 ($1.1 billion). Volume of export in commodities increased by 21.6% during the first seven months of the current year while imports increased by 25.4%. Negative balance of foreign trade in commodities was $161.7 million.

Negative effect on the solvency of the internal market causes underfinancing of some budgetary expense items. According to the data of the State Treasury, in January—August the Consolidated Budget revenues totaled UAH 28.61 billion or accounted for 67.6% of the revenues targeted for the year. The expenditures amounted to only UAH 27.323 billion or 64.6%.

In January—August 2000 the level of the State Budget revenues accounted for only 89.12% of the targeted level. Liabilities to some sectors (system of the State management, science, education, health protection, construction, etc.) for the total of nearly UAH 2 billion were not met.

Positive trends in the crediting sectors are unstable. During the year the growth rate of credit supply by commercial banks to economic entities was gradually decreasing. (Credit supply as percentage of those granted in the first quarter increased by 9%; compared to the level of the second quarter and July the credit supply increased by 5% and 0% respectively). Compared to the first and the second quarters of 2000 and July deposits of the population in commercial banks increased by 18%, 10% and 2% respectively.

The level of capitalization of banks still remains unsatisfactory (as of July 2000, the paid-out statutory capital totaled $612 million; compared to December 1999 it increased only by 9.7%). Banking system in Ukraine is not capable to credit the economy to more or less sufficient level. In fact, the commercial banks’ equity is not increasing. By late 1999 it totaled $1.119 billion, in July 2000 it amounted to $1.154 billion.

The Ministry of Finance of Ukraine has not settled the problem concerning the servicing its debts to the NBU. Therefore, this creates the permanent threat of the destabilization of the situation in the currency market and prevents the NBU from implementation weighted monetary policy.

The general economic situation still remains contradictionary. It is quite possible that in the nearest future the drastic decrease in the rate of the economic growth or even economic slump will be observed.

Copyright© 2000, The Ukrainian Economic Monitor