2014 Index of Economic Freedom

Ukraine

overall score49.3
world rank155
Rule of Law

Property Rights30.0

Freedom From Corruption21.9

Limited Government

Government Spending37.5

Fiscal Freedom79.1

Regulatory Efficiency

Business Freedom59.8

Labor Freedom49.8

Monetary Freedom78.7

Open Markets

Trade Freedom86.2

Investment Freedom20.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 45.5 million
  • GDP (PPP):
    • $335.2 billion
    • 0.2% growth
    • -0.9% 5-year compound annual growth
    • $7,374 per capita
  • Unemployment:
    • 8.0%
  • Inflation (CPI):
    • 0.6%
  • FDI Inflow:
    • $7.8 billion
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Ukraine’s economic freedom score is 49.3, making its economy the 155th freest in the 2014 Index. Its score is 3.0 points higher than last year, with notable increases in five of the 10 economic freedoms including business freedom, control of public spending, and monetary freedom. Ukraine is ranked last out of 43 countries in the Europe region, and its overall score is lower than the world average.

Over the 20-year history of the Index, Ukraine’s economic freedom score has advanced by over 9 points. Score increases in half of the 10 economic freedoms include particular gains in monetary stability and openness to global trade and more moderate progress in fiscal freedom and the elimination of corruption.

Nonetheless, Ukraine’s economy remains “repressed.” Deeper institutional reforms are critical for the achievement of more broadly based development. The inefficient legal framework remains highly vulnerable to political interference, and corruption further undermines the fragile rule of law.

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Background

Ukraine gained independence with the collapse of the Soviet Union in 1991. President Victor Yanukovych, in office since 2010, has pursued 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, and plans for closer cooperation with the EU have been proceeding despite Russian opposition. The government is trying to borrow $4 billion in international capital markets, in part to help service $3 billion owed to the International Monetary Fund and $2 billion owed to Russia’s VTO Bank. It also has allowed Chevron and Shell to prospect for gas in the Black Sea. Ukraine has well-developed agricultural and industrial sectors, but dependence on steel and steel-product exports makes it vulnerable to global financial turmoil and Russian pressure. Its geostrategic location provides a vital 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 21.9 Create a Graph using this measurement

Corruption, one of Ukraine’s most serious problems, continues to worsen. Business magnates benefit financially from their close association with top politicians. In 2012, a new law eliminated transparency requirements for public procurement. The judiciary is subject to intense political pressure and largely carries out the will of the executive branch. Contracts are not well enforced, and expropriation is always a possibility.

Limited GovernmentView Methodology

The top individual income tax rate is 17 percent, and the corporate tax rate was cut to 19 percent effective January 2013. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden equals 38 percent of gross domestic income. Public expenditures amount to 46 percent of GDP. Public debt is below 40 percent of gross domestic output. Government finances have been affected by the eurozone slowdown, pushing up deficits.

Regulatory EfficiencyView Methodology

The business start-up process has been streamlined, but completing licensing requirements is still time-consuming and costs more than six times the level of average annual income. The labor code is outmoded and lacks flexibility. Massive and price-distorting government subsidies have resulted in domestic natural gas prices that are less than one-quarter of the importation cost.

Open MarketsView Methodology

The average tariff rate is 1.9 percent. Government procurement policies sometimes favor domestic firms. Many state-owned enterprises exist, and foreign investment in several sectors is restricted by the government. The weak financial system remains underdeveloped. Restructuring of the banking sector has proceeded slowly in the aftermath of the recent global financial crisis, which has resulted in bailouts and nationalization of several banks.

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
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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