Ukraine has a population of 42.8 million (excluding the Autonomous Republic of Crimea [Crimea]), and at 603 628 square kilometres (km2) is the second-largest country in Europe by area. It is located at the crossroads of the European Union, the Russian Federation (Russia), and Black Sea and Caspian regions, and has abundant mineral resources including oil, natural gas and coal, and great hydro and biomass potential. With its considerable population and high energy consumption, it is one of Europe's largest energy markets. It is also the country that transits the most natural gas in the world, playing a key role in delivering Russian gas to European markets.
Ukraine experienced a long period of very strong economic growth in 2000-07, driven by low gas prices, a strong national currency (the hryvnia [UAH]) and high foreign steel demand and prices. Ukraine's economy remained open and export-oriented, and it joined the World Trade Organization in 2008.
Nominal gross domestic product (GDP) was UAH 1 979 billion in 2015 (USD 90.6 billion in 2017 USD). After sharp currency devaluation in 2014-15, per capita GDP declined in 2015 to USD 2 115 (in 2017 USD) according to the World Bank. The share of steel in total exports declined almost twofold in recent years, to 22.9% in 2016, but the share of agricultural and food industry products reached 41.2% according to the State Statistical Service of Ukraine. Machinery and manufacturing's share in total exports decreased in 2014‑16 mainly due to trade restrictions imposed by Russia in 2013‑15. As its key trade partner, the European Union received 31.9% of total exports in 2016, whereas Russia accounted for only 9.3%, a dramatic decrease from 28% in 2013; the share of total exports to Commonwealth of Independent States (CIS) countries also declined in 2016, to 17.8% (https://bank.gov.ua/doccatalog/document?id=27033407).
Ukraine remains heavily reliant on oil product and gas imports. Variations in the UAH–USD exchange rate, access to export markets, closure of Russia's market, external construction activity in Asia and the Middle East, agriculture, and energy supply and price trends have a substantial impact on its domestic economy.
Despite strong growth up to 2007, Ukraine underwent two severe economic crises between 2010 and 2017. Owing to its exposure to foreign markets, Ukraine has been severely affected by the global economic and financial crises that began in autumn 2008. Ukraine's economy fell into deep recession in 2009, with real GDP down by 14.8% and industrial output falling almost 22%. The International Monetary Fund (IMF) offered support to Ukraine and agreed to a USD 16.4-billion Stand-by Arrangement in November 2008 to stabilise the banking system and mitigate the impact of the collapse in output. In total, approximately USD 11 billion was released by the IMF under the arrangement, as well as USD 3.4 billion under a second Stand-by Arrangement in mid-2010. Ukraine's real GDP recovered by 4.2% during 2010 and a further 5.2% in 2011.
Ukraine entered another recession in mid-2012, with GDP growth falling to 0% in 2013, ‑6.8% in 2014 and ‑9.9% in 2015. Driven by factors such as insufficient capital investment, lower steel demand, high energy import prices, lack of structural reforms, and corruption, the economy never recovered from the 2009 crisis. Following month-long street protests in Kiev, a change in government occurred in March 2014.
This was followed by loss of control of Crimea and the beginning of military conflict in Ukraine's eastern regions that resulted in casualties, significant damage to infrastructure and considerable economic loss. This has provoked strong depreciation of the hryvnia (from UAH 8=USD 1 in December 2013 to UAH 27=USD 1 in February 2017), far lower budget revenues and a 24% fall in industrial output in 2014‑15. In 2016, the economy showed tentative signs of recovery: industrial production increased by 2.4% according to the State Statistical Service of Ukraine, while the World Bank estimates that GDP rose 1% and projects it to grow to 2% in 2017 and 3% thereafter. However, escalation of the conflict in eastern Ukraine and possible policy reform reversals could seriously impede economic recovery.
Deep structural changes and an overall decline in economic activity caused total gas consumption to drop from 50.4 billion cubic metres (bcm) in 2013 to 32.3 bcm in 2016 and led to a drop in imports from 28 bcm to 11.1 bcm. Also during this period, a dispute with Gazprom over the price of gas and its transit through Ukrainian territory prompted Ukraine to source its imports from European suppliers instead, so Gazprom's share in total gas imports shrank from 92% in 2013 to 0% in 2016. Coal production and transportation have been severely disrupted in the Donbass region, as has electricity generation of combined heat and power (CHP) plants, especially in conflict areas.
In 2014, the Ukrainian government benefited from another IMF Stand-by Arrangement and the disbursement of two financial tranches of USD 3.6 billion and USD 1.4 billion. The government of Ukraine agreed with the IMF to conduct structural reforms to stabilise its economy and bring it back to a sustainable growth path. Strong financial support has also been provided by the European Union, the World Bank, the European Bank for Reconstruction and Development (EBRD) and by several countries on a bilateral level. In March 2015, the IMF and Ukraine concluded a new Extended Arrangement for over USD 17.5 billion, cancelling the previous Stand-By Arrangement. The parties agreed on policies for strengthening public finances, advancing structural reforms and securing financial stability.
Ukraine co-operates with the European Union through the Eastern Partnership, which aims to foster political association and economic integration between the European Union and the Eastern Neighbourhood countries, including Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.
Ukraine became an Observer to the Energy Community Treaty in November 2006 and a full Member in September 2010, and has begun adopting and implementing the
acquis communautaire on energy, namely the legislative frameworks for the electricity and gas sectors and requirements in the areas of renewable energy, competition and the environment.
The Ukrainian government also signed and ratified an Association Agreement with the European Union in 2014, and the Deep and Comprehensive Free Trade Agreement between Ukraine and the European Union entered into force on 1 January 2016.
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