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The biggest increase in gross value added in January—May occurred in industry (it accounted for 10.8%), in trade and public catering (6.5%), construction (5.1%) and transport and communications (1.7%).

Compared to the respective period of 1999 the volume of consumer goods produced in January—May 2000 increased by 31.9%. Production of consumer foodstuffs, alcoholic beverages and non-foodstuff increased by 25.1%, 37.4% and 35.4% respectively.

Non-governmental enterprises contracted 76% of the overall volume of construction work. In January—May the increase in contract work by these enterprises was 6.1% while the 17.9% decline in contract work by state-owned enterprises was observed.

Product	All categories of enterprises		Including private sector
	2000	2000 as % of 1999	2000	2000 as % of 1999
Meat (in live weight), thousand tons	1108.5	103.4	791.3	101.9
Milk, thousand tons	4527.5	92.6	3142.8	103.9
Eggs, million	4236.6	98.0	2881.1	101.3
Wool, tons	650.0	107.3	423.0	107.9

Industry	May 2000 compared to
	April 2000	December 1999
Industry total	100.6	110.8
Power industry	99.6	101.3
Fuel industry	96.7	114.8
Ferrous metallurgy	99.4	108.0
Non-ferrous metallurgy	100.7	103.8
Chemical and petrochemical industry	102.9	113.3
Machine-building	101.3	108.7
Woodworking and pulp-and-paper industry	100.1	107.7
Construction materials industry	101.4	106.9
Light industry	101.4	109.7
Food industry	104.5	115.2
Flour-and-cereals and animal formula feed industry	110.1	157.3

Item	Consolidated budget		Including the State Budget
	in January—April 2000	as % of GDP	in January—April 2000	as % of GDP
Total revenues	12365.5	27.4	8911.0	19.7
including
Tax revenues — total	8309.0	18.4	5217.3	11.5
including:
enterprise profit tax	2192.6	4.8	1597.6	3.5
personal income tax	1664.2	3.7	0.0	0.0
payment for land	317.2	0.7	—	—
value-added tax	2524.4	5.6	2524.4	5.6
excise tax	474.7	1.1	446.2	1.0
local taxes and fees	144.7	0.3	—	—
Non-tax revenues — total	2597.9	5.7	2173.2	4.8
including:
receipts from privatization	492.6	1.1	445.6	1.0
receipts of depreciation charges	59.2	0.1	59.2	0.1
state duty	92.1	0.2	61.3	0.2
State target funds	1442.6	3.2	1176.2	2.6
Total expenditures	12036.0	26.7	8757.9	19.4
including expenditures on:
state administration	748.4	1.7	542.5	1.2
law enforcement activities and ensuring security of the state	641.0	1.4	575.9	1.3
social and cultural establishments and activities	4953.1	11.0	1902.3	4.2
industry, power generation and construction	613.9	1.4	554.7	1.2
agriculture, forestry, fishing and hunting	151.0	0.3	63.6	0.1
transport, roads, communications, telecommunications and computer science	386.4	0.9	57.5	0.2
housing and public utilities	240.4	0.5	0.3	0.0
national defense	546.9	1.2	545.1	1.2
Chornobyl relief fund	453.4	1.0	453.4	1.0
public specialized funds	568.0	1.3	546.6	1.2
Excess of receipts over expenditures	329.5	0.7	153.1	0.3

Similarly to the previous years, May 2000 was characterized by the decrease in both nominal (by 11.6%) and real (by 14.1%) monetary incomes compared to April of the current year. (Real monetary incomes are defined by way of exclusion of mandatory payments, voluntary donations and with allowance for inflation-related losses).

As of June 21, 2000 the M3 aggregate increased reached UAH 26371 million (since the beginning of the year it increased by 19.4%).

Since April 4, 2000 the NBU established a new discount rate at the level of 29% and a lombard rate at the level of 34%.

As of May 1, 2000, the balance of indebtedness related to the credits granted by the Ukrainian banks increased by 1% and amounted to UAH 24346 million including UAH 11137 million of credits denominated in national currency. The amount of credits granted to the economic entities by commercial banks in April increased only by 2% (up to UAH 14114 million) while the quarterly increase was 18%.

Interest rate on credits of commercial banks was 35% in April and deposit interest rate was 10.0%.

As of June 26, 2000 the gross hard currency reserves of the NBU, which are calculated in accordance with the IMF methodology, amounted to $ 926 million. That was by $ 62 million less the level on June 1, 2000 and by $164 million less the level in the beginning of the year.

Since the beginning of the year throughout June 21, 2000 the face value of bonds of internal government loan sold by the Ministry of Finance at the primary market amounted to UAH 1795 million whereas the amount of the Ministry’s extendicture on the redemption of bonds from previous issues was UAH 899 million.

As of the beginning of May the official hryvnia exchange rate to US dollar was UAH 540.03/100 USD. Average monthly rate of hryvnia was UAH 542.28/100 USD.

As of May 1, 2000 the population of Ukraine was 49.5 million. During January—April the population decreased by 171.3 thousands or by 0.3%.

Comparing statistical factors of the current year with those of 1999 one can see a substantial economic growth (in the last year, especially in January—June, the economic slump was recorded, which was caused by the financial crisis of 1998). However, the achieved economic growth may not be attributed only to this fact. The increase in fixed capital investment has contributed to the growth. The amount of the fixed capital investment increased by 26.2% in relative prices and by 42.9% in actual prices in the first quarter of 1999. During the same period the capital employed by the foreign investors was 70.1% up compared to the level in the respective period of 1999.

In spite of significant expenses to service the state debt (especially foreign debt), the country succeeded not to significantly decrease the hard currency and gold reserves of Ukraine; the hryvnia exchange rate remained relatively stable (at the same time the IMF’s extended financing program, which was suspended in September 1999, is not resumed).

Since March of the current year arrears of wages and budgetary social service benefits are being gradually paid off.

However, certain signs of stabilization do not show the way to recovery from a long-term systematic crisis. There is still a real threat of the next financial collapse (especially if cooperation with the IMF and the World Bank is not renewed).

Economic growth is to a considerable extent achieved on the account of enormous amount of non-payments of consumers for fuel and power resources, especially by non-payments for the consumed electric power (the latter has reached UAH 8.8 billion). Free of charge unauthorized consumption of the Russian gas reached an enormous level. It is obvious that such actions cannot ensure a long-term economic growth. They result in destruction of the fuel and power sector and economic sanctions on the part of Russia are inevitable.

In the course of the first four months of 2000 the surplus of the consolidated and the State budgets should be marked out as one of the biggest achievements of the financial policy. However, the budget surplus became to a considerable extent possible due to underfinancing of expense items.

However, according to the data of the operative monitoring by the Ministry of Finance, throughout the five months period of the current year the State Budget deficit was recorded. The deficit amounted to UAH 263.6 million in the first five months of 2000 (it was only UAH 206.2 million in the respective period of the previous year). As of June 21, 2000 the deficit of the consolidated budget of Ukraine (calculated by the methodology of the IMF) reached UAH 441 million whereas the consolidated budget surplus was recorded in late May. The deficit was financed through the internal sources, including proceeds from privatization (proceeds from privatization in the first quarter well exceeded the targeted amount) as well as the placement of bonds of internal governmental loan.

The situation with budget arrears has also worsened. During the whole 1999 the budget arrears increased by UAH 2 billion (or by 22%) and accounted for UAH 11.8 billion, however only in January—May 2000 the budget arrears increased by UAH 2.4 billion (by 20%).

The amount of budget revenues from taxation is increasing only due to the inflation; in real terms the amount is decreasing.

The Government started a new large-scale issuance of Bonds of Internal Government Loan (BIGL) in April and that immediately caused a decrease in the crediting of the real sector of the economy. As of the end of May, the average weighted interest rate on credits of commercial banks was 29.8%, i.e., the credits are still practically unobtainable for the enterprises.

Control over the situation in the pricing sphere is practically lost. In June, the inflation rate has reached 3.7% (level of inflation projected by the Ministry of Economy was 1.9%). Since the beginning of the year the inflation increased by 18.7%, i.e. during the first quarter of 2000 it has almost reached the annual level projected when the Budget–2000 was approved.

Thus, the numerous negative trends and factors contributing to the possible substantial destabilization still manifest themselves.

Copyright© 2000, The Ukrainian Economic Monitor