2015 Index of Economic Freedom

Ukraine

overall score46.9
world rank162
Rule of Law

Property Rights20.0

Freedom From Corruption25.0

Limited Government

Government Spending28.0

Fiscal Freedom78.7

Regulatory Efficiency

Business Freedom59.3

Labor Freedom48.2

Monetary Freedom78.6

Open Markets

Trade Freedom85.8

Investment Freedom15.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 45.4 million
  • GDP (PPP):
    • $336.8 billion
    • 0.1% growth
    • -1.3% 5-year compound annual growth
    • $7,423 per capita
  • Unemployment:
    • 7.9%
  • Inflation (CPI):
    • -0.3%
  • FDI Inflow:
    • $3.8 billion
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Ukraine’s economic freedom score is 46.9, making its economy the 162nd freest in the 2015 Index. Its score is 2.4 points lower than last year, reflecting declines in eight of the 10 economic freedoms with especially grave deteriorations in property rights, the management of government spending, and investment freedom. Ukraine is ranked last out of 43 countries in the Europe region, and its overall score is lower than the world average.

Ukraine has registered the second largest score decline of any country graded in the 2015 Index. Previously, its economic freedom had advanced by 1.1 points, with improvements in half of the 10 economic freedoms driven largely by gains in business freedom and monetary freedom.

Ukraine’s economy remains “repressed.” The rule of law is particularly weak. The investment regime remains closed, with foreign investment competing with large state-owned enterprises. A rigid labor market and bureaucratic business regulations inhibit the development of a dynamic private sector.

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Background

Ukraine gained independence after the collapse of the Soviet Union in 1991. In February 2014, President Victor Yanukovych was ousted by pro-Euro–Atlantic members of parliament after he used security forces to crack down on popular protests against his attempt to tighten ties with Russia. Petro Poroshenko was elected to replace him in May 2014. After Yanukovych was unseated, Russia illegally annexed the Autonomous Republic of Crimea, and pro-Russian separatists increased their efforts to destabilize the eastern part of the country. In 2014, Ukraine accepted $30 billion in aid from the IMF, World Bank, EU, and other bilateral donors. Ukraine has signed an Association Agreement with the EU that includes Deep and Comprehensive Free Trade Area (DCFTA) accords. Ukraine has well-developed agricultural and industrial sectors, but dependence on steel exports and natural gas imports makes it vulnerable to global financial turmoil and Russian pressure. Ukraine joined the World Trade Organization in 2008 and the EU’s Eastern Partnership in 2009.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 25.0 Create a Graph using this measurement

Pro-Western Ukrainians hoped their 2014 Euromaidan revolution would dismantle the oligarchic politics and deeply rooted cronyism that allowed business owners to amass wealth by exploiting their access to those in power rather than through efficient management, but that corrupt system is still largely in place under the Poroshenko government. The judiciary remains weak, and contracts may not be well enforced.

Limited GovernmentView Methodology

Ukraine’s top individual income tax rate is 17 percent, and the top corporate tax rate is 18 percent. Other taxes include a value-added tax and a property tax. The total tax burden equals 38.9 percent of domestic income. Government spending amounts to 49 percent of GDP, and public debt equals 41 percent of domestic output. The IMF is helping to bolster public finances.

Regulatory EfficiencyView Methodology

Complexity often creates uncertainty in commercial transactions. The business start-up process has been streamlined, but completing licensing requirements is still time-consuming. Modern and efficient bankruptcy procedures are not in place. The labor code is outmoded and lacks flexibility. Massive and price-skewing government subsidies (7 percent of GDP on natural gas subsidies alone) have caused deep economic distortions.

Open MarketsView Methodology

Ukraine’s average tariff rate is 2.1 percent. Trade and investment flows have been disrupted as a result of disputes with Russia. Foreign investors may not purchase agricultural land. Bureaucratic requirements deter much-needed growth in private investment. The primarily cash-based economy suffers from a lack of sufficient capitalization. Nonperforming loans continue to be a drag on the banking system.

Country's Score Over Time

Bar Graph of Ukraine Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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