2017 Index of Economic Freedom

Ukraine

overall score48.1
world rank166
Rule of Law

Property Rights41.4

Government Integrity29.2

Judicial Effectiveness22.6

Government Size

Government Spending38.2

Tax Burden78.6

Fiscal Health67.9

Regulatory Efficiency

Business Freedom62.1

Labor Freedom48.8

Monetary Freedom47.4

Open Markets

Trade Freedom85.9

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 42.7 million
  • GDP (PPP):
    • $339.5 billion
    • -9.9% growth
    • -2.1% 5-year compound annual growth
    • $7,971 per capita
  • Unemployment:
    • 9.9%
  • Inflation (CPI):
    • 48.7%
  • FDI Inflow:
    • $3.0 billion
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Ukraine’s economy has contracted deeply and remains very fragile. Ongoing disruptions of the country’s productive and export capacities and significant capital outflows have put increasing pressure on the currency and reserves, severely undermining monetary stability. The overall soundness of fiscal policy has deteriorated substantially, and public deficits and debt have increased sharply. The rule of law remains fragile and is further undercut by judicial ineffectiveness.

A strong commitment to structural reforms to reduce corruption and open the economy further to Western investment and financial institutions will be crucial in helping to stabilize the economy. The government has launched a comprehensive set of reforms to restore growth, but progress is not yet evident.

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Background

Ukraine gained independence after the Soviet Union collapsed in 1991. Pro-Euro–Atlantic members of parliament ousted President Victor Yanukovych in February 2014, and Petro Poroshenko was elected to replace him in May. Parliamentary elections in October 2014 led to a pro-European government under Prime Minister Arseniy Yatesenyuk of the center-right People’s Front. In April 2016, Yatesenyuk resigned and was replaced by Volodymyr Groysman. Russia has illegally annexed the Crimea, and Russian-backed separatists continue to destabilize the eastern part of the country. The shaky Minsk II cease-fire agreement remains in effect but is violated daily by the Russian-backed separatists.

Rule of LawView Methodology

Property Rights 41.4 Create a Graph using this measurement

Government Integrity 29.2 Create a Graph using this measurement

Judicial Effectiveness 22.6 Create a Graph using this measurement

Under Ukrainian law, property rights are protected, and mortgages and liens are recorded. The government that took office in April 2016 succeeded in passing constitutional reforms of the judiciary, one of Ukraine’s weakest and least trusted public institutions. The IMF has urged the government to tackle high-level corruption, but a new anticorruption bureau has met strong resistance from vested interests across the institutions of state and society.

Government SizeView Methodology

The top individual income tax rate is 20 percent, and the top corporate tax rate is 18 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 37.6 percent of total domestic income. Government spending has amounted to 45.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.5 percent of GDP. Public debt is equivalent to 80.2 percent of GDP.

Regulatory EfficiencyView Methodology

The business start-up process has been streamlined, but completion of licensing requirements is still time-consuming. Overall, political instability continues to compound regulatory uncertainty in commercial transactions. The labor code is outmoded and lacks flexibility. The government has initiated a comprehensive reform agenda for the energy sector that is aimed at establishing market pricing for gas and heating.

Open MarketsView Methodology

Trade is extremely important to Ukraine’s economy; the value of exports and imports taken together equals 108 percent of GDP. The average applied tariff rate is 2.1 percent. Conflict with Russia interferes with trade and investment flows, and state-owned enterprises distort the economy. The primarily cash-based economy suffers from a lack of sufficient capitalization. The large number of nonperforming loans is a drag on the banking system.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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