2021 Index of Economic Freedom

Ukraine

OVERALL SCORE56.2
WORLD RANK127
Rule of Law

Property Rights48.5

Judicial Effectiveness41.1

Government Integrity37.9

Government Size

Tax Burden88.7

Government Spending48.2

Fiscal Health87.7

Regulatory Efficiency

Business Freedom63.5

Labor Freedom48.7

Monetary Freedom65.8

Open Markets

Trade Freedom79.2

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 44.4 million
  • GDP (PPP):
    • $409.8 billion
    • 3.2% growth
    • 0.3% 5-year compound annual growth
    • $13,341 per capita
  • Unemployment:
    • 8.9%
  • Inflation (CPI):
    • 7.9%
  • FDI Inflow:
    • $3.1 billion

Ukraine’s economic freedom score is 56.2, making its economy the 127th freest in the 2021 Index. Its overall score has increased by 1.3 points, primarily because of an increase in the tax burden score. Ukraine is ranked last among 45 countries in the Europe region, and its overall score is below the regional and world averages.

Ukraine’s ranking improved slightly within the mostly unfree category this year. To maintain the momentum toward greater economic freedom, the government will need to boost investor confidence by continuing to upgrade the investment code and by undertaking deep and comprehensive reforms to strengthen rule-of-law institutions and improve the protection of property rights, judicial effectiveness, and government integrity.

IMPACT OF COVID-19: As of December 1, 2020, 12,962 deaths had been attributed to the pandemic in Ukraine, and the economy was forecast to contract by 7.2 percent for the year.

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Background

Long known as the “Breadbasket of Europe” because of its fertile black soil, Ukraine gained independence after the Soviet Union collapsed in 1991. In the six years since the “Maidan” revolution, Ukraine’s political landscape has been transformed. Rival business–political networks continue to exercise significant influence, but a generational change is in progress. Actor and comedian Volodymyr Zelenskyy, a 41-year-old political newcomer, won the April 2019 presidential election, and his party won an absolute majority in July 2019 parliamentary elections. Russia’s illegal annexation of the Crimean Peninsula and destabilization of the eastern Donbas region continue to damage the Ukrainian economy, which relies heavily on the production of wheat and exports of industrial and energy products.

Rule of LawView Methodology

Property Rights 48.5 Create a Graph using this measurement

Judicial Effectiveness 41.1 Create a Graph using this measurement

Government Integrity 37.9 Create a Graph using this measurement

Ukrainian law addresses property rights, but enforcement by corrupt courts is unreliable. Mortgages and liens are recorded. Enforcement of contracts is time-consuming and costly. The judiciary’s susceptibility to political pressure, corruption, and bribery weakens public confidence in the courts. Government integrity is severely compromised, and corruption within state-owned enterprises is of particular concern.

Government SizeView Methodology

The top individual income tax rate is 20 percent, and the top corporate tax rate is 18 percent. Other taxes include value-added and property taxes. The overall tax burden equals 20.1 percent of total domestic income. Government spending has amounted to 41.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 50.1 percent of GDP.

Regulatory EfficiencyView Methodology

Ukraine has simplified the process for obtaining construction permits, which are now also less costly in Kyiv because the contribution fee to the City Council has been reduced. The reliability of the power supply has improved. The labor force participation rate rose in 2019. According to World Bank data, approximately 60 percent of the government’s annual budget is spent on subsidies and other transfer payments.

Open MarketsView Methodology

Ukraine has 18 preferential trade agreements in force. The trade-weighted average tariff rate is 2.9 percent, and 150 nontariff measures are in effect. Tension with Russia continues to undercut more dynamic investment flows, and state-owned enterprises distort the economy. A new investment decree to simplify the foreign investor registration procedure was adopted in late 2019. About 65 percent of adult Ukrainians have formal banking accounts.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland81.9-0.1
2Ireland81.40.5
3United Kingdom78.4-0.9
4Estonia78.20.5
5Denmark77.8-0.5
6Iceland77.40.3
7Georgia77.20.1
8Lithuania76.90.2
9Netherlands76.8-0.2
10Finland76.10.4
11Luxembourg760.2
12Sweden74.7-0.2
13Austria73.90.6
14Czech Republic73.8-1.0
15Norway73.40.0
16Germany72.5-1.0
17Latvia72.30.4
18Armenia71.91.3
19Cyprus71.41.3
20Bulgaria70.40.2
21Malta70.20.7
22Belgium70.11.2
23Azerbaijan70.10.8
24Spain69.93.0
25Poland69.70.6
26Romania69.5-0.2
27North Macedonia68.6-0.9
28Slovenia68.30.5
29Portugal67.50.5
30Serbia 67.21.2
31Hungary67.20.8
32Kosovo66.5-0.9
33Slovak Republic66.3-0.5
34France65.7-0.3
35Albania65.2-1.7
36Italy64.91.1
37Turkey64-0.4
38Croatia63.61.4
39Montenegro63.41.9
40Bosnia and Herzegovina62.90.3
41Moldova62.50.5
42Russia61.50.5
43Belarus61-0.7
44Greece60.91.0
45Ukraine56.21.3
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