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Successfully investing in Ukraine

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last updated on 27 May 2020 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in Ukraine?

In 2019 Ukraine continued economic growth: The Ukrainian Economy increased 4.6 per cent in the second quarter of 2019. In all year 2019 as well as in January and February 2020 the economic growth was 3,2 per cent. The national currency Hryvnia also gained strongly in 2019.

 

The economic growth has created many new jobs and wages grew by almost 20 per cent in 2019. An average wage in Kiev reached in September 2019 the 16,000 Hryvnia mark, which is equivalent to 550 Euro.

 

In 2019 there was a significant increase in private consumption. This is mainly due to rising wages and remittances from abroad. With increasing consumption, imports also grew in 2019. The main trading partners of Ukraine are the countries in the European Union and Germany is one of the most important ones.

 

The positive economic development of Ukraine should continue in 2020. In mid-March the country introduced restrictions to curb the spread of Covid-19 infections. Ukraine, like other countries, has been in lockdown for several weeks.

 

How would you describe the investment climate in Ukraine? Which sectors offer the largest potential? 

The investment climate in Ukraine has been continuously improving since 2014. The new President Zelensky has been in office since May 2019 –he has been very committed since taking office. A lot of laws were passed in 2019 and were put on the way. Zelensky's main goals are to end the war in the Eastern Ukraine, to fight corruption, to stimulate privatisation and to open up the land market. The long-awaited Labor Code should also be revised and adapted to the new requirements of the current labor market. It is expected to enter into force in 2020.

 

Zelensky’s party has an absolute majority in the Ukrainian parliament “Verhovna Rada”. In this situation it is easier to pass the draft law and get the economic reforms underway. The investment climate is therefore good, as the new president has emphasized more than once that foreign investors and investments are very important for Ukraine. He will therefore do everything possible to create a good investment climate and to attract investors to the country.

 

The construction industry in Ukraine boomed in 2019. In addition to a large number of construction projects, a large number of infrastructure projects were carried out. Thanks to the very good climatic conditions, the renewable energy sector is also booming in Ukraine. In addition the announced stimulation and advancement of privatization should offer many new and interesting opportunities for investors. There will certainly be many more investment opportunities for the opening of the land market planned for 2020.

 

What challenges do German companies face during their business ventures into Ukraine?

Especially german companies complain about the still present corruption – although the situation has improved significantly compared to 2012 and 2013. The bureaucracy and the constantly changing legal situation, especially in tax legislation, is always a challenge, as the companies have to adapt to the new situation.
 

When will Ukraine return to economic stability?

Ukraine is on the way to gaining a new identity since the Maidan Revolution in 2014. The Association Agreement with the EU has been signed. A lot of reforms have been (partially) implemented since 2014. They were absolutely necessary to first establish and then maintain economic stability. However, most of the reforms are planned to take several years, so that it will certainly take some time before they are completed and the first visible success is achieved.

 

Most Ukrainians voted for the new President Zelensky and placed great hopes in him. He promised the population a lot, above all to create a better, fair Ukraine. He started very well and started his first term of office with great commitment. Everything points back to the fact that nothing stands in the way of Ukraine's positive development and economic stability. But the outbreak of the pandemic acted as a stop in Ukraine, as in other countries.

 

In your opinion, how will Ukraine develop?

Nowadays it is not possible to make a reliable forecast for the development of Ukraine. It is not yet possible to predict how quickly the Ukrainian economy will recover from the consequences of the pandemic and lockdown of the economy. However, it is certain that Ukraine has great advantages as a “Investocation” (due to good skilled workers, proximity to the EU border, cheap production and labor costs, as well as good infrastructure). In the future, it can therefore be an alternative investment location for all investors who will withdraw from Asian markets after the pandemic and will move to a European location. 

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