SOCIO-ECONOMIC DEVELOPMENT of UKRAINE in 1998

In contrast to-well developed countries in Europe and other parts of the world, Ukraine remains a state with an extensive type of economic development. Therefore, the problems of rationalization of nature utilization are closely related to the reforming of the productive spheres of the economy. The country is characterized by disproportions in the general national and regional economic interests, and by a discrepancy between the allocation of the natural-resource and socio-economic potentials.

The resolution of the economic problems is complicated by the economic situation in the state during the period 1991-1997, and distinguished by a decrease of the gross domestic product and national income and by increased consumer prices. One positive tendency was an increase of the gross domestic product observed early in 1998, and this gives reason for optimism. But the socio-economic situation was determined by the basic economic tendencies both in Ukraine and the newly independent neighbouring countries. Affected by the financial crisis in August, the positive development dynamics was reversed, though the production decline was less than for the same period in 1997 and constituted 1.5% in 1998 (1.8% in 1997).

The crisis caused a decline of production in priority sectors of the economy, beginning in September 1998, and, as a result, a gradual decrease of the rates of the gross surplus value. The features of the crisis were reflected in all macroeconomic production, consumption, and employment figures.

The dynamics of industrial production in the regions of Ukraine in 1998 was characterized by the fact that, in spite of the production decline, a strengthening of production potential was observed in some regions. In 1998 one could observe a production increase in the Autonomous Republic of the Crimea, in 13 regions, and in such cities as Kyiv and Sevastopol. The most intensive increase was observed in Odesa (27.4%) and Transcarpatian (19.9%) regions and in Sevastopol (11.2%). At the same time the production decline at enterprises of 10 regions was within a range of 2.6-12.2%.

Technological improvement of production has remained a problem. In 1998 only 15.1% of the production plants introduced advanced technological processes, manufactured new products on their basis, or performed work aimed at increasing the technical level of production. Financial constraints prevented innovation activities and led to a further lag in the use of new technologies and equipment at most enterprises.

In 1998 the amount of agricultural production at farms of all categories decreased by 8.3% as compared to 1997.

Certain negative tendencies were observed in the social sphere. The purchasing power of population continued to decrease. Total sales of consumers goods decreased by 4.5% (as compared to 1997). Hardest hit was retail turnover, with more than a quarter.

In 1998 the registered job market had a steady increase of manpower supply and a decrease of its demand. The number of registered unemployed citizens as of 1 January 1999 exceeded 1.5 times last year’s figure and reached 1,039,300 persons. Almost all citizens of this category had the status of unemployed (96.5%). The increase in the number of unemployed was a result of a decrease of employment potentialities. The largest number of persons applying for jobs advertised were registered in Ivano-Frankovsk (329 persons), Volyn (137 persons) and Lviv (103 persons) regions, and the lowest in the cities of Sevastopol (4 persons) and Kyiv (6 persons).

The demographic situation was rather complicated in the country in 1998. The population of Ukraine as of 1 December 1998 was 50.1 million people, which was 0.7% less than at the beginning of the year. The number of births being surpassed by the number of deaths  (natural decrease of population), reaching 5.8 persons per 1,000, was the main cause of the population decrease.

The efficiency of the Ukrainian economy is too low in comparison with well-developed countries. As to gross domestic product per capita manufactured in 1998 (US$ 2.361), Ukraine is behind Russia (US$ 4.531) and Belorus (US$ 4.398). Similar indices in Luxembourg are US$ 31.004, in the USA US$ 26.977, and in Japan and Germany US$ 20.370.

The country’s competitiveness is a direct reflection of its economic efficiency. As to this index, Ukraine is last among 53 World Economic Forum countries. This is not conducive to the creation of a positive image of Ukraine in international business circles, and is a barrier against investments in the Ukrainian economy.

In spite of a rather high rating as to the availability of dominant production factors among well-developed countries, Ukraine is inferior to them in terms of the level of their utilization. Use of fixed capital in Ukraine is three times as low, and use of arable lands 11 times and labour resources 15 times as low as in France; that of scientific potential is about 20 times as low.

The sectoral structure of the Ukrainian industry has been overburdened by the production of primary raw materials and semi-finished products. The share of the fuel-power complex in the structure of the Ukrainian industry is twice as high as in the structure of production of such European countries as France, Germany, and Italy; that of the metallurgical complex is three times as high. At the same time, the share of advanced production branches: machine building and metal processing, and the chemical and petrochemical industry is 1.5-2 times as low.

The Ukrainian industry tends to produce raw materials and semi-manufactures, which has caused both the high energy capacity of the national product and the threatening technogenic pressure on the environment. Since 1991 energy capacity of the gross domestic product has increased 1.5 times and makes up 2.28 kg of conventional fuel for UAH 1 (1 Ukrainian hryvnia equals approx. US$ 0.23), which is nine times as high as in the OECD countries. Even while the industrial production is declining, Ukraine finds itself among the countries with the highest volumes of waste generation and accumulation. This situation has arisen when during a long-term decline of production, the decrease of the pressure on the environment was inconsiderable or not observed at all. In particular, the consumption of fresh water in 1998 was 76% of the level in 1990, while the discharge of polluted waste into surface water bodies increased 1.25 times.

Under such conditions, achievement of the general goals of environmental rehabilitation, the optimization of use of natural resources, and the improvement of the situation in social sector, require consolidated efforts of all sectors of society, as well as new approaches and mechanisms to provide consistent actions aimed at clear policy implementation.

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