Ukraine Macroeconomic Environment
In the Ukraine, consumer inflation continued to show a downward trend since 2011. The annual growth of consumer prices is at its lowest point in the past 9 years with inflation rising at 1.9% in that time period (National Bank of Ukraine). Overall, several factors continued to have a moderate effect on inflation. Signs of recovery in external markets and a gradual pick-up in domestic investment demand fueled a rise in the PPI. Cooling foreign demand, a lower grain harvest and failing construction works added to the decrease of economic activity. A challenging global economic is bringing the prices of chemicals and metals with are a staple export for Ukraine (Segura, 2013). The Ukraine’s lack of foreign demand will limit potential while the government seeks foreign trade options. The Gross Domestic Product (GDP) in Ukraine was worth 165.25 billion US dollars in 2012. The GDP value of Ukraine represents 0.27 percent of the world economy (Trading Economics). The demand side of GDP, consumer spending, and growing wages has been steady, even against the deterioration in the foreign economic conditions and the ongoing recession in other countries, being Ukraine’s trading partners. Internal consumer spending makes up a large part of the country economic activity. The government has placed and emphasis on allocating money for welfare and social assistance and this has help sustain consumer spending. The downside of this is that the government is receiving less tax income that it’s spending on social programs. Stable wages and a slight decline in inflation helped to maintain high domestic consumer demand. Over the next few years private spending may not be able to cover up the lack of foreign exports. Due to a much slower growth of exports, the current account deficit has been expanding faster this year. Preliminary estimates of the National Bank of Ukraine place the current account deficit at $11.1 billion...
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