2013 Index of Economic Freedom

Ukraine

overall score46.3
world rank161
Rule of Law

Property Rights30.0

Freedom From Corruption23.0

Limited Government

Government Spending29.4

Fiscal Freedom78.2

Regulatory Efficiency

Business Freedom47.6

Labor Freedom49.9

Monetary Freedom71.0

Open Markets

Trade Freedom84.4

Investment Freedom20.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 45.6 million
  • GDP (PPP):
    • $329.5 billion
    • 5.2% growth
    • 0.6% 5-year compound annual growth
    • $7,233 per capita
  • Unemployment:
    • 8.4%
  • Inflation (CPI):
    • 8.0%
  • FDI Inflow:
    • $7.2 billion
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Ukraine’s economic freedom score is 46.3, making its economy the 161st freest in the 2013 Index. Its score is 0.2 point higher than last year, with modest gains in monetary freedom and business freedom that outweigh declines in labor freedom and freedom from corruption. Ukraine is ranked last out of 43 countries in the Europe region, and its overall score is lower than the world average.

Economic freedom continues to be severely repressed in Ukraine. Previous reforms, including implementation of competitive tax rates and minor regulatory changes, have failed to spur broad-based economic development or the emergence of a more dynamic private sector.

Such reforms are more than offset by poor policies and weak institutional structures throughout the economy. Corruption is pervasive, laws are poorly administered, and contract enforcement and protection of property rights are seriously deficient. Progress in privatization and attracting foreign investment has been meager. The primarily cash-based economy is plagued by a lack of sufficient capitalization in the state-controlled financial sector. The potential benefits of trade freedom are undermined by institutional controls on capital and investment.

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Background

Ukraine has been independent since the collapse of the Soviet Union in 1991. Since taking office in 2010, President Victor Yanukovych has fast-tracked rapprochement with Russia, harassed the political opposition, and impeded press freedom. Ukraine joined the World Trade Organization in 2008 and the European Union’s Eastern Partnership in 2009; ratification of an Association Agreement regulating cooperation between Kiev and Brussels has been delayed because of concerns regarding Ukraine’s rule of law and judicial independence. In addition to $3 billion in debt payments due to the International Monetary Fund in 2012, Ukraine needs to repay $2 billion to Russia’s VTO bank and is trying to borrow $4 billion in the international markets. Ukraine has well-developed industry, rich agricultural lands, and significant natural resources and is an important energy transit route from Russia to Western Europe.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 23.0 Create a Graph using this measurement

The rule of law is uneven across the country, and protection of real and intellectual property rights is weak. The judiciary is subject to executive branch influence, criminal pressure, and corruption. Contracts are not well enforced, and expropriation is always a possibility. Corruption, which pervades all levels of the executive branch and all spheres of economic activity, is a major obstacle to foreign investment.

Limited GovernmentView Methodology

The standard income tax rate is 17 percent, and the standard corporate tax rate is 21 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 36.9 percent of total domestic income. Government spending has risen to 48.5 percent of GDP. The budget deficit has been high, averaging near 5 percent of GDP in the past three years. Public debt is over 35 percent of GDP.

Regulatory EfficiencyView Methodology

Despite progress in regulatory reform, administrative complexity often creates uncertainty in commercial transactions. The business start-up process has been streamlined, but completing licensing requirements is still time-consuming and costs more than 10 times the level of average annual income. The labor code is outmoded and lacks flexibility. The government influences prices through state-owned enterprises. Monetary stability remains weak.

Open MarketsView Methodology

The trade-weighted average tariff rate is low at 2.8 percent, but there are some non-tariff barriers that constrain trade freedom. The investment framework remains underdeveloped with several sectoral restrictions, and bureaucratic requirements deter growth in private investment. The large number of non-performing loans continues 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

Bar Graphs comparing Ukraine to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81-0.1
2Denmark76.1-0.1
3Ireland75.7-1.2
4Estonia75.32.1
5United Kingdom74.80.7
6Luxembourg74.2-0.3
7Finland741.7
8The Netherlands73.50.2
9Sweden72.91.2
10Germany72.81.8
11Georgia72.22.8
12Lithuania72.10.6
13Iceland72.11.2
14Austria71.81.5
15Czech Republic70.91.0
16Norway70.51.7
17Armenia69.40.6
18Belgium69.20.2
19Cyprus69-2.8
20Slovakia68.71.7
21Macedonia68.2-0.3
22Spain68-1.1
23Malta67.50.5
24Hungary 67.30.2
25Latvia66.51.3
26Poland661.8
27Albania65.20.1
28Romania65.10.7
29Bulgaria650.3
30France64.10.9
31Portugal63.10.1
32Turkey62.90.4
33Montenegro62.60.1
34Slovenia61.7-1.2
35Croatia61.30.4
36Italy60.61.8
37Serbia 58.60.6
38Bosnia and Herzegovina57.30.0
39Moldova55.51.1
40Greece55.40.0
41Russia51.10.6
42Belarus48-1.0
43Ukraine46.30.2
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