2008–2009 Ukrainian financial crisis

Short description: Economic decline caused by the Great Recession

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Ukraine's GDP real annual growth rate 1990 - beyond Ukraine was one of the countries with the most negative GDP growth in 2009

Ukraine was hit heavily by the Great Recession, the World Bank expected Ukraine's economy to shrink 15% in 2009[1] with inflation having been 16.4%.[2]

The deficit of Ukraine's foreign trade in goods and services January through September 2009 was estimated at $1.08 billion, which was 9.5 times down on the same period in 2008, export of goods over the period decreased by 48.7%, to $27.478 billion, while imports fell by 53.5%, to $31.570 billion; export of services dropped by 23.2%, to $6.841 billion, while imports were down by 19.9%, to $3.829 billion (the deficit of Ukraine's foreign trade over the first nine months of 2008 was estimated at $10.284 billion, which was 2.7 times up on the same period of 2007).[3]

According to a forecast by the State Employment Centre, unemployment in Ukraine would triple to 9% in 2009 (there was 3% unemployment at the end of 2008), which would mean about 3 million people would apply for employment services.[4] In September 2009, the official level of unemployment was 1.9%.[5] 95% of the population of Ukraine had felt the influence of the 2008 financial crisis; in July 2009 21% of them stated that "The crisis has a catastrophic impact on me and my family", this figure dropped to 17% in October 2009.[6] Actual year-on-year wages in Ukraine fell in October 2009 by 10.9%, while in October 2008, it grew by 4.8% year-over-year according to the State Statistics Committee of Ukraine.[7] The real incomes for Ukrainians in 2009 fell down 8.5% while the nominal income went up 6.2%.[8] The Ukrainian economy shrank 15 percent in 2009.[9] The second Tymoshenko Government had predicted GDP growth of 0.4% in 2009 and a slowdown in inflation to 9.5% (also in 2009), although the overwhelming majority of economists considered this forecast to be excessively optimistic.[2]

The Ukrainian economy recovered in the first quarter of 2010.[10]

## Contents

* 1 Reasons for crisis
* 2 Crises per year
* 2.1 2008
* 2.2 2009
* 2.3 2010
* 3 See also
* 4 References

## Reasons for crisis

Analysts say the reasons for the crises were slumping steel prices, local banking problems and the cutting of Russian gas supply of January 2009.[11][12] This made key industries such as metallurgy and machine building lay off workers, and real wages started to fall for the first time in a decade.

In 2008 the hryvnia dropped 38% against the US dollar, eclipsed only by the Icelandic krona and the Seychelles rupee.[13] Since many loans and mortgages were issued in dollars and most Ukrainians are paid in hryvnias (Ukraine's currency), they had to buy dollars with the weak hryvnya, and so they were paying back much more on the loans than they had expected.[12] From December 2008 till mid-May 2009 Ukrainian banks were not allowed to grant requests for early withdrawals of bank deposits.[14] As of September 2009 financial analysts predict a recovery of the hryvnia.[15]

According to David Heslam of Fitch ratings "At the root of the problem is Ukraine's inconsistent macroeconomic policy framework, as the authorities are aiming to defend the exchange rate while avoiding necessary fiscal tightening in the absence of adequate sources of non-monetary financing".[16]

In November 2009, Ukraine's Minister of Economics Bohdan Danylyshyn stated that in his view the "permanent conflicts" and "lack of understanding" between the National Bank of Ukraine (NBU) and the Cabinet of Ministers was one of major factors of the deep fall of the Ukrainian GDP in 2009, as in his view the conflicts affected the efficiency of the anti-crisis policies of Ukraine[17] (he also insists government should get involved in NBU's activity[18]).

Asked in August and October 2009 "Who bears the most responsibility for the difficult socioeconomic situation in Ukraine?" about a half of all Ukrainians polled (47%) answered President of Ukraine Viktor Yushchenko, and 22% blamed Prime Minister of Ukraine Yulia Tymoshenko, while 17% of the respondents thought that the Verkhovna Rada was also responsible for the lack of progress in solving economic problems.[6]

## Crises per year

### 2008

The share of problem loans in bank portfolios grew to 10.3 percent by 11 December 2008 and is continuing to grow. Banks have all but stopped issuing loans, and clients have hurried to withdraw deposits. In October 2008, the National Bank of Ukraine introduced a moratorium on withdrawals ahead of schedule.[12] Industrial output in November 2008 tumbled 28.6 percent, following a 19.8 decline in October 2008. Steel production slumped 48.8 percent, oil refining and chemical output fell 35.2 percent and machine building by 38.8 percent.[19] Ukraine's economy shrunk 14.4 percent year-on-year in November 2008. Statistical data showed the gross domestic product (GDP) growth slowed to 3.6 percent in January–November compared to 5.8 percent in January–October. Ukraine's Economy Ministry expects the economy to grow 3.5-4.0 percent in 2008.[20] The Hryvnia also lost value.[21]

According to a poll (held 25 November through 5 December 2008) by the Horshenin Institute of Management Problems about 79% of those polled suffered from rise in prices, about 29% from delays in payment of salaries. More than some 20% have suffered from reduction of salaries. In the families of some 14.8% somebody lost their job, and some 6% said their enterprise shut down.[22] A total of 90.8% of those polled described their financial state as "making both ends meet" and 83.1% said they are short of money for food. Only 2.4% of Ukrainians said they were not hit by the economic crisis at all.[23]

Mid-December 2008 the International Monetary Fund (IMF) has lowered the forecast for Ukraine's GDP in 2009 from a 2.5% growth rate to a 5% decline,[24] the same day the Cabinet of Ministers worsened the GDP growth forecast to 0.4% from 6% for 2009.[25]

In November 2008, the IMF approved a stand-by loan program for Ukraine to the tune of $16.5 billion.[26] A second one worth $1.87 billion might be granted in February 2009.[27]

In November 2008, the official unemployment rate increased by 0.4 percent to 2.3 (Previously 1.9% in September), the State Statistics Committee said that as of 1 December 2008, it registered 640,000 unemployed people.[28]

### 2009

Ukraine's banking system recorded losses of ₴7 billion (UAH) ($909 million) in the first quarter of 2009 compared to a profit of ₴2.1 billion in the same period a year ago, according to a central bank report of 22 April 2009.[29] In April 2009 the IMF forecast an 8.0 percent shrink of the Ukrainian economy in 2009 and a 1.0 percent grow in 2010.[30] In Mid-April 2009, Ceyla Pazarbasioglu, the IMF mission chief in Ukraine, stated that there were a number of encouraging signs that Ukraine's economy had started to adjust to the global crisis. According to Olena Belan, analyst at Dragon Capital, "that is a good signal for investors, showing that Ukraine is taking anti-crisis measures and the economic situation is under control."[31] Foreign direct investment did plunge 66% (to $2.7 billion) in the first half of 2009.[32]

On 18 May 2009 Ukraine's State Statistics Committee reported that the deficit of Ukraine's foreign trade in the first quarter of 2009 was estimated at $419.7 million, which was 9 times down on the same period the previous year.[33]

The Ukrainian state became the de facto owner of Ukrhazbank (84.21% after investing ₴3.2 billion), Rodovid Bank (99.97% after investing ₴2.809 billion) and Bank Kyiv (99.93% after investing ₴3.563 billion) early June 2009.[34]

The industrial output of Ukraine in the period January–August 2009 shrank by 29.6% compared to the same period in 2008. The fall in Ukraine's industrial output slowed to 26.7% in July 2009 compared to July 2008, compared to a fall of 27.5% in June and 31.8% in April and May 2009 (compared to 2008 again).[35]

On 17 September 2009 the World Bank approved a loan for Ukraine in the amount of $400 million.[36]

According to a public opinion poll conducted by FOM-Ukraine in September/October 2009 46.2% of those polled thought that the economic situation in the country would worsen within the next few months, while 35% stated that the economic situation in Ukraine would remain unchanged and 8% thought the situation would improve.[37]

On 1 November 2009 the International Monetary Fund (IMF) warned that it could cut financial assistance to Ukraine; managing director of the IMF Dominique Strauss-Kahn stated he was “very worried” with President Viktor Yushchenko’s decision to sign a bill adopting wage and pension increases. Prime Minister Yulia Tymoshenko accused Yushchenko and other candidate for the 2010 Ukrainian presidential election of backing the increase to sabotage her government and thereby undercutting her presidential bid.[38]

In late November 2009, acting vice governor of the National Bank of Ukraine Vasyl Pasichnyk forecasted no mass bankruptcies in the Ukrainian banking sector.[39]

### 2010

Ukraine's total foreign debt (state and corporate) had reached 93.5% of the 912.563 billion Hryvnya GDP in March 2010;[40] late February 2010 the Ukrainian Finance Ministry had reported that the country's total state debt by early 2010 was to 32.9% of the GDP.[40] Standard & Poor's upgraded Ukraine's rating the same day.[41]

18 March 2010 the National Bank of Ukraine stated the total external debt in Ukraine increased 2.3% to $103.973 billion in 2009,[42] and it considered a 4% GDP growth realistic for 2010 the same day.[43]

The Ukrainian economy recovered in the first quarter of 2010 due to stronger-than-expected growth in the global economy, driven primarily by emerging Asia and Latin America, larger social transfers to the population approved in the 2010 budget law and a lower price for imported natural gas (due to the 2010 Ukrainian–Russian Naval Base for Natural Gas treaty).[10]

## See also

* Economy of Ukraine
* List of banking crises

## References

1. ↑ Ukraine's economy 'to shrink 15%', BBC News (16 July 2009)
2. ↑ 2.0 2.1 World Bank worsens outlook for fall in Ukraine's GDP to 9%, and inflation to 16.4% , Interfax-Ukraine (7 April 2009)
3. ↑ Deficit of Ukraine's foreign trade in goods and services shrinks by 9.5 times in nine months, Kyiv Post (17 November 2009)
4. ↑ Ukrainian unemployment to triple in 2009 – employment official, Interfax-Ukraine (17 February 2009)
5. ↑ Official level of unemployment in September falls by 0.1 percentage points to 1.9 percent, Kyiv Post (15 October 2009)
6. ↑ 6.0 6.1 Ukrainians blame Yuschenko and Tymoshenko for creating economic mess, Kyiv Post (20 October 2009)
7. ↑ Actual year-on-year wages in Ukraine 11% down in September 2009, Kyiv Post (27 November 2009)
8. ↑ Ukrainians real incomes in 2009 down 8.5%, nominal income up 6.2%, Kyiv Post (1 April 2010)
9. ↑ Ukraine agrees budget with IMF, funding seen from May, Kyiv Post (2 April 2010)
10. ↑ 10.0 10.1 Ukraine - Macroeconomic situation - April 2010, UNIAN (19 May 2010)
11. ↑ Trade in Ukraine hryvnia drying up amid crisis, UNIAN (19 December 2008)
12. ↑ 12.0 12.1 12.2 Hard Times for Ukrainian Banks, Central Bank Chairman Under Fire, The Jamestown Foundation (17 December 2008)
13. ↑ Ukraine's economy 'to shrink 9%', BBC News (7 April 2009 )
14. ↑ Central bank cancels moratorium on early withdrawal of deposits, UNIAN (18 May 2009). Accessed 2009-05-18. Archived 2009-06-02.
15. ↑ Ukraine's Hryvnia to Rally from Slump, Nomura Says, Bloomberg L.P. (14 September 2009)
16. ↑ Ukraine GDP Fell 15.9% Last Quarter, Extending Slump (Update3) , Bloomberg L.P. (16 November 2009)
17. ↑ Economy minister: Permanent conflicts between NBU and Cabinet contribute to deep fall of GDP in 2009, Kyiv Post (21 November 2009)
18. ↑ Economy Minister insists government get involved in NBU's activity, Kyiv Post (23 November 2009)
19. ↑ Ukraine's November industrial output falls 28.6%, UNIAN (12-12-2008)
20. ↑ Ukraine economy shrinks 14.4 pct yr/yr in Nov '08, UNIAN (16-12-2008)
21. ↑ Hryvnia's value tumbled to 9.6 to U.S. dollar, UNIAN (17 December 2008)
22. ↑ Ukrainians pessimistic about their perspectives – poll, UNIAN (17 December 2008)
23. ↑ Economic crisis hits most Ukrainians, survey shows, Interfax-Ukraine (17 December 2008)
24. ↑ IMF Lowers Forecast For Ukraine's 2009 GDP Growth Rate From 2.5% To -5% , Ukrainian News Agency (17 December 2008)
25. ↑ Cabinet Worsens GDP Growth Forecast To 0.4% From 6% For 2009 , Ukrainian News Agency (17 December 2008)
26. ↑ Head of IMF's Resident Representative Office in Ukraine to change his job, Interfax-Ukraine (17 December 2008)
27. ↑ Poroshenko Admits Reviewing Of IMF-Signed Memorandum , Ukrainian News Agency (8 February 2009)
28. ↑ Official Unemployment Rate Increases By 0.4 Percentage Points To 2.3% In November , Ukrainian News Agency (18 December 2008)
29. ↑ CORRECTED - Ukraine banks record $909 mln losses Q1-C.Bank, Reuters (22 April 2009)
30. ↑ Ukraine economy to shrink 8.0 pct this year –IMF, UNIAN (23 April 2009)
31. ↑ IMF agrees new loan for Ukraine, BBC News, (17 April 2009)
32. ↑ Investor Unfriendly, Kyiv Post (8 October 2009)
33. ↑ Deficit of Ukraine's foreign trade in 1Q shrinks by nine times - statistics, Interfax-Ukraine (18 May 2009). Accessed 2009-05-18. Archived 2009-06-02.
34. ↑ Cabinet Endorses Recapitalization Of Ukrhazbank, Kyiv Bank, Rodovid Bank , Ukrainian News Agency (10 June 2009)
35. ↑ Ukraine's industrial output falls 23.3% in August, says statistics committee, Interfax-Ukraine (16 September 2009). Accessed 2009-09-22. Archived 2009-09-26.
36. ↑ World Bank approves $400 million loan for Ukraine, Interfax-Ukraine (18 September 2009). Accessed 2009-09-22. Archived 2009-09-26.
37. ↑ Poll: Ukrainians not supporting activities of president, premier, Kyiv Post (12 October 2009)
38. ↑ IMF warns Ukraine on aid By Roman Olearchyk, Financial Times (1 November 2009)
39. ↑ Central bank forecasts no mass bankruptcies in Ukrainian banking sector, Kyiv Post (23 November 2009)
40. ↑ 40.0 40.1 Ukraine's gross foreign debt reaches 93.5% of gross domestic product, Kyiv Post (17 March 2010)
41. ↑ Standard&Poor's upgrades Ukraine's rating, Kyiv Post (18 March 2010)
42. ↑ Ukraine's external debt up 2.3% in 2009 - National Bank, Kyiv Post (18 March 2010)
43. ↑ National Bank of Ukraine considers 4% GDP growth realistic for 20, Kyiv Post (18 March 2010)

* v
* t
* e

Great Recession in Europe

By European country|

* Belgium
* Cyprus1
* Greece1
* Iceland
* Ireland1
* Latvia
* Portugal1
* Russia
* Spain1
* Ukraine

Responses|

| By region|

* Greece
* Ireland
* Portugal
* Spain
* United Kingdom

|

Specific|

* Icelandic financial crisis protests (2009)
* May Day protests across Europe (2009)
* French pension reform strikes (2010)
* Irish students (2010)
* March for a Better Way (2010)
* UK students (2010)

Background|

* Economic and Monetary Union of the European Union
* European social model
* Icelandic outvasion
* Irish banking crisis
* Anglo Irish Bank
* Hidden loans
* Nationalisation
* Irish emergency budget
* Société Générale trading loss
* United Kingdom bank rescue package
* 2010 European Union bank stress test

Related articles|

* List of countries by public debt
* Occupy movement
* PIIGS

* 1 See: European debt crisis

* v
* t
* e

Financial crises

* Banking panic
* Bear market
* Credit crunch
* Credit cycle
* Currency crisis
* Debt crisis
* Energy crisis
* Flash crash
* Hyperinflation
* Liquidity crisis
* Minsky moment
* Stock market crash

Pre–1000|

* Crisis of the Third Century (CE 235–284)

1000–1760|

* Great Bullion Famine (c. 1400–c. 1500)
* The Great Debasement (1544–1551)
* Kipper und Wipper (1621–1623)
* Tulip mania crash (1637)
* South Sea bubble crash (1720)
* Mississippi bubble crash (1720–1721)

1760–1840|

* Amsterdam banking crisis of 1763
* Bengal bubble crash (1769–1784)
* Crisis of 1772
* Dutch Republic financial collapse (c. 1780–1795)
* Panic of 1785
* Copper Panic of 1789
* Panic of 1792
* Panic of 1796–97
* Danish state bankruptcy of 1813
* Panic of 1819
* Panic of 1825
* Panic of 1837

1840–1870|

* Panic of 1847
* Panic of 1857
* Panic of 1866
* Black Friday (1869)

1870–1914|

* Panic of 1873
* Paris Bourse crash of 1882
* Panic of 1884
* Arendal crash (1886)
* Baring crisis (1890)
* Encilhamento (1890–1893)
* Panic of 1893
* Australian banking crisis of 1893
* Black Monday (1894)
* Panic of 1896
* Panic of 1901
* Panic of 1907
* Shanghai rubber stock market crisis (1910)
* Panic of 1910–11

1918–1939|

* Early Soviet hyperinflation (1917–1924)
* Weimar Republic hyperinflation (1921–1923)
* Shōwa financial crisis (1927)
* Wall Street Crash of 1929
* Panic of 1930

1945–1973|

* Kennedy Slide of 1962

1973–1982|

* 1970s energy crisis (1973–1980)
* 1973 oil crisis
* 1973–74 stock market crash
* Secondary banking crisis of 1973–1975
* Latin American debt crisis (1975–1982)
* 1976 IMF crisis
* 1979 oil crisis
* Brazilian hyperinflation (1980–1982)

1982–2007|

* Brazilian hyperinflation (1982–1994)
* Souk Al-Manakh stock market crash (1982)
* Chilean crisis of 1982
* 1983 Israel bank stock crisis
* Black Saturday (1983)
* Savings and loan crisis (1986–1995)
* Black Monday (1987)
* 1988–1992 Norwegian banking crisis
* Friday the 13th mini-crash (1989)
* Japanese asset price bubble crash (1990–1992)
* 1990 oil price shock
* Rhode Island banking crisis (1990–1992)
* 1991 Indian economic crisis
* 1990s Swedish banking crisis (1991–1992)
* 1990s Finnish banking crisis (1991–1993)
* 1990s Armenian energy crisis (1991–1995)
* Cuban Special Period (1991–2000)
* Black Wednesday (1992)
* 1992 Colombian energy crisis
* 1994 bond market crisis
* Venezuelan banking crisis of 1994
* Mexican peso crisis (1994)
* 1997 Asian financial crisis
* October 27, 1997 mini-crash
* 1998 Russian financial crisis
* 1998–99 Ecuador financial crisis
* Samba effect (1999)
* California electricity crisis (2000–01)
* Dot-com bubble crash (2000–2004)
* 2001 Turkish economic crisis
* 9/11 stock market crash (2001)
* Stock market downturn of 2002
* South American economic crisis of 2002
* 2002 Uruguay banking crisis
* 2003 Myanmar banking crisis
* 2000s energy crisis (2003–2008)
* 2004 Argentine energy crisis
* Nigerian energy supply crisis (2005–)
* 2007 Chinese stock bubble crash
* Zimbabwean hyperinflation (2007–)

2007–08|

* U.S. housing market correction (2006–07)
* 2008 Bulgarian energy crisis
* 2008 Central Asia energy crisis
* 2008 Latvian financial crisis
* 2008–09 Belgian financial crisis
* 2008–09 Russian financial crisis
* 2008–09 Ukrainian financial crisis
* 2008–2011 Icelandic financial crisis
* 2008–2011 Irish banking crisis
* 2008–2014 Spanish financial crisis
* European debt crisis
* Greek government-debt crisis
* Subprime mortgage crisis
* U.S. bear market of 2007–2009

Post–2008|

* 2009 Ecuador electricity crisis
* 2009 Dubai debt standstill
* Venezuelan banking crisis of 2009–10
* 2010 Flash Crash
* 2010–2014 Portuguese financial crisis
* Energy crisis in Venezuela (2010–)
* 2011 Tōhoku earthquake and tsunami stock market crash
* August 2011 stock markets fall
* 2011 Bangladesh share market scam
* 2012–13 Cypriot financial crisis
* 2013 Chinese banking liquidity crisis
* Venezuela economic crisis (2013–)
* Gaza electricity crisis (2013–)
* 2014–2016 Brazilian economic crisis
* Puerto Rican government-debt crisis (2014–)
* 2014–2017 Russian financial crisis
* 2015–16 Chinese stock market turbulence
* 2015–16 stock market selloff
* Zulia energy collapse (2015–)
* Brexit stock market crash (2016)
* 2016 Southeastern U.S. gas shortage
* Venezuelan hyperinflation (2016–)
* 2017 Sri Lankan fuel crisis
* Ghana banking crisis (2017–18)
* 2018 cryptocurrency crash
* 2018 Turkish currency and debt crisis

* List of banking crises
* List of economic crises
* List of sovereign debt crises
* List of stock market crashes and bear markets

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