the economic and geographical analysis of Ukraine

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the economic and geographical analysis of Ukraine

Ukraine is a country located in Eastern Europe. The country has an area of 603,628 km2. This makes Ukraine to be the largest country in the entire Europe. Ukraine is a country under a unitary republic which is under a semi-presidential system. The system has separate powers, judiciary, executive, and legislative branches. However, the economy of Ukraine is one of the weakest economies in the world. This was factual before the collapse of the Yanukovych regime and the events of 20th February, 2014. When Ukraine gained its independence in 1991, there were high expectations that it will become a wealthy free market democracy full of member of the Euro-Atlantic and European communities. Ukraine hoped to would become a member of the Organization for Economic Cooperation and Development (OECD), the North Atlantic Treaty Organization (NATO), and European Union (EU). However, Ukraine has never fulfilled these expectations.

From the year 2000 to the Orange revolution that occurred in 2004, the per capita GDP of Ukraine rose as compared to the GDP of its neighboring countries. The GDP rose from 61% to 68% (DeBardeleben and Crina 67). However, Ukraine’s GPD in 2013 declined precipitously. Notably, Ukraine’s economy was in recession in 2013. This recession has been noted to have increased in 2014 where the economy of Ukraine has experienced a 7% to 10% drop. This abrupt crisis is associated with the falling of average income and decline in the real GDP of Ukraine. The crisis is best evident in the collapse of the Ukrainian currency and the reduction of its foreign currency reserve. Notably, if a country’s currency collapses and there is little foreign exchange reserve obtainable, the crisis will escalate swiftly.

However, since the beginning of this year, the Ukrainian currency has dropped by 20% in relative to the US dollar. This means that there is rising inflation for all the imported goods, less investment by businesses located in Ukraine, slower economic growth as less consumption spending by the Ukrainians. The collapse of the currency also means that the Ukrainian central bank has to raise the domestic interest rates. The rise in the domestic interest rates will slow the economy as the domestic investment and consumption decline further. The raising of the rates will decipher into slow direct foreign investment into the country.

The collapse of Ukrainian currency is worsened by the loss if foreign currency reserve. Notably, foreign exchange is needed for making payments on bonds to the foreign investors (Relations 90). This means that if there are no payments made, there is the default. Default means that Ukraine will no longer get loans, there will be more job loss and production cutbacks. The loss of foreign reserves also means that Ukraine will not have money to finance its imports of some of the critical consumption and production goods. Additionally, foreign exchange is disappearing swiftly on Ukraine. It is disappearing in the form of capital flight as Ukrainian investors and consumers. It is also disappearing in the form of Ukrainian central bank which is using foreign exchange to crutch up the Ukrainian currency from any further collapse.

However, there are numerous talks on how Ukraine needs a rescue package from the west. If Ukraine takes a loan and the currency continues to drop, which may occur given the political events in the country, there will be a rise in the amount of debt. Mainly, the collapse of the Ukrainian currency is more political and even ideological. It is a fact that the GDP per capita of Ukraine was rising until the 2004 Orange revolution (DeBardeleben and Crina 87). This is because the Ukrainian economy until 2004 had been firmly assimilated with the Russian Federation’s. An attempt to break that assimilation after 2004 would result to an adjustment period of slow growth. This occurred as Ukraine endeavored to orient in its financial dealings and export. Its economy justifiably weakened. Ukraine’s break with the Russian Federation post-2004 resulted to rise in the price of energy. Having got few gas and oil reserves, when the inflation and global oil market hit between 2006 and 2008, Ukraine took a major economic hit. Notably, this was followed by the global economic downturn in 2008 to 2010 which seriously affected Ukraine.

In 2010, the Ukraine attempted further to situate its trade to Western Europe. However, Europe fell into a second ‘twofold dip’ subsidence beginning late 2010 that proceeded into 2013. Western Europe economies, banks, and organizations could not build their interest for Ukrainian trades, nor send capital for investment into the Ukraine in any extraordinary degree. Europe itself was buried in a second subsidence and profoundly engrossed with salvaging governments and banks in its own “outskirts” (Portugal, Greece, Spain, Italy, Hungary, Ireland, Baltics) Real investment inside in Europe was at that point frail and bank giving even inside the EU was declining (Dowling and Rana 82). Giving advances and more straightforward speculation to the Ukraine was not high on the EU motivation. It was monetarily and politically impractical from the European Union’s advantage.

Looking longer term, ought to the USA and the west succeed politically by one means or another in the nearing challenge for the Ukraine, the Ukrainian economy will be in shambles far more awful than it is even today. Ukraine’s coin will be near worthless. Government appropriations stripped from families. Furthermore, economic hardship serious, as a ‘Greek-Style’ starkness is forced. Anyhow western banks and multinational organizations will have a field day, as it’s been said, purchasing up commercial companies and industries for next to nothing in the east and rebuilding them to fit their worldwide financial arrangements.

It seems numerous Ukrainians may not yet comprehend the major economic and political progress at play in the ‘east-west standoff’ over their nation. From one perspective, they do not need Yanukovych ‘colleague industrialist’ administrations that do little for them and much for themselves. Be that as it may the comrade business people still stay in Kiev, in Parliament and government, despite the fact that Yanukovych himself is gone; they have just exchanged sides to ensure their individual premiums (and obviously their western financial balances and speculations when dangers were made to stop them). The Ukrainians are consequently going to exchange one set of financial vultures (e.g. Russian Oligarchs) for an alternate in Kiev: The in the past homegrown Oligarch who is presently currently revamping himself with new, closer western ties.

In conclusion, some of the political decisions made in 2004 have brought negative economic trends to Ukraine. On top of this, currently, Ukraine is being hit by the emerging market crisis which has roots in the policy shift in the USA central bank. This means that the current Ukraine’s economic crisis cannot be blamed entirely on Yanukovych. However, Ukraine’s economic problems are deeper. If the current economic problems present in Ukraine are as a result of the 2008 western capitalism’s economic crash, then the solution to their crisis will be from the same source which is western economies.

Work cited

DeBardeleben, Joan, and Crina Viju. Economic Crisis in Europe: What It Means for the Eu andRussia. New York: PalgraveMacmillan, 2013.

Dowling, J. M., & Rana, P. B. (2010). Asia and the global economic crisis: Challenges in afinancially integrated world. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.

Macridis, Roy. “Stalinism and the Meaning of Titoism.” World Politics 4.02 (1952): 219-238.

Relations, D. I. M. F. E. (2009). Finance & Development, March 2009. Washington:International Monetary Fund.