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The Warsaw Voice » Business » January 7, 2009
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Crisis Hits Ukraine...
January 7, 2009   
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A huge foreign trade deficit, shrinking production and a 50-percent devaluation of the national currency-this was the Ukrainian economy in a nutshell at the end of 2008 and the beginning of 2009.

The country's heavy reliance on exports-chiefly low-value-added metallurgical goods that are no longer in demand-has produced disastrous consequences. Almost half of the country's steel mills have practically ground to a halt. They once sold almost 80 percent of their output abroad.

"Ukraine lacks foreign currency and cannot pay for imports," says Konstanty Litvinov, CEO of ISD Steel, a company that is part of a giant corporation known as the Industrial Union of Donbass.

Negative trends have also been observed in Ukraine's chemical industry where plants such as Rovno Azot and Cherkassy have had to limit production.

Another problem is posed by the way Ukrainian companies have done business to date. "Our businesses relied on loans from the West, but now it's difficult to borrow money," says Ihor Burakovsky, director of the Institute for Economic Research and Policy Consulting in Kiev.

Political instability is compounding the country's economic woes. According to Vasyl Yurchishin, a director at the Razumkov Institute in Kiev, the global crisis is not the only factor that is to blame. Political squabbling inside the country has added to Ukraine's economic problems, he says. "As a result, neither the government nor the parliament can work normally," Yurchishin says.

... and Russia
Russia is also beset with economic troubles. Industrial production in the country dropped by almost 11 percent at the end of 2008, with 600,000 people waiting to get their overdue wages. Delayed wage payments grew by 93 percent over one month to a staggering 7.8 billion rubles ($278 million).

Production in November 2008 dropped by 10.8 percent compared with October and by almost 9 percent year-on-year, according to Russia's statistics office. Kommersant daily newspaper notes that the production decrease is of the same extent as that during the "great Russian crisis" 10 years ago.

Things are the worst in the construction sector. For example, production of roofing has dropped by 23 percent, steel load-bearing structures declined by 14 percent, and cement went down by 10 percent. Seventy-five percent of construction workers are waiting for overdue wages. According to media reports, people are defaulting on their mortgage payments and have stopped buying homes.

The prices of new housing in Moscow are expected to drop by anywhere between 47 and 60 percent in 2009, according to a recent forecast by Russia's largest retail bank and mortgage loan provider Spierbank.
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