2018 Index of Economic Freedom

Ukraine

overall score51.9
world rank150
Rule of Law

Property Rights41.0

Government Integrity29.0

Judicial Effectiveness29.5

Government Size

Government Spending45.0

Tax Burden80.2

Fiscal Health75.9

Regulatory Efficiency

Business Freedom62.7

Labor Freedom52.8

Monetary Freedom60.1

Open Markets

Trade Freedom81.1

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 42.5 million
  • GDP (PPP):
    • $353.0 billion
    • -9.9% growth
    • -2.8% 5-year compound annual growth
    • $8,305 per capita
  • Unemployment:
    • 8.9%
  • Inflation (CPI):
    • 13.9%
  • FDI Inflow:
    • $3.3 billion
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Ukraine’s economic freedom score is 51.9, making its economy the 150th freest in the 2018 Index. Its overall score has increased by 3.8 points, reflecting improvements in eight of the 12 economic freedom indicators and particularly significant improvements in monetary freedom and investment freedom. Ukraine is ranked last among 44 countries in the Europe region, and its overall score is below the regional and world averages.

Ukraine’s oligarch-dominated economy had already slowed before Russia’s 2014 occupation of Crimea and ongoing aggression in the eastern part of the country badly damaged economic growth. Significant progress was made on reforms to make the country more prosperous, democratic, and transparent, but more improvements are needed, including fighting corruption, developing capital markets, privatizing state-owned enterprises, and improving the legislative framework and the rule of law. Public enthusiasm for Western reforms has waned, however, as economic stagnation continues.

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Background

The oldest eastern Slavic state, Ukraine was once one of Europe’s most powerful nations but later endured decades of Soviet rule before gaining independence in 1991. Pro-Western members of parliament ousted Russian-backed President Victor Yanukovych in February 2014, and Petro Poroshenko was elected to a five-year presidential term in May. Parliamentary elections in October 2014, a few months after Russia’s annexation of Crimea, installed a center-right government under Prime Minister Arseniy Yatesenyuk’s People’s Front. In 2016, Yatesenyuk was replaced by Volodymyr Groysman. Russian-backed separatists continue to destabilize the eastern part of the country. Known as the “Breadbasket of Europe” for its fertile black soil, Ukraine is one of the world’s top wheat producers and also exports many industrial and energy products.

Rule of LawView Methodology

Property Rights 41.0 Create a Graph using this measurement

Government Integrity 29.0 Create a Graph using this measurement

Judicial Effectiveness 29.5 Create a Graph using this measurement

Property rights are protected under Ukrainian law, and mortgages and liens are recorded. There are serious issues regarding corruption in the judiciary, one of the country’s weakest and least trusted public institutions. Judges are largely seen as protectors of business and other powerful sources of influence. Corruption remains a serious problem for Ukraine, and progress on increasing accountability is quite slow.

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 35.5 percent of total domestic income. Over the past three years, government spending has amounted to 42.8 percent of total output (GDP), and budget deficits have averaged 2.6 percent of GDP. Public debt is equivalent to 81.2 percent of GDP.

Regulatory EfficiencyView Methodology

The momentum for business reform has stalled, and political instability continues to compound regulatory uncertainty in commercial transactions. Ukraine has a well-educated and skilled labor force, but the labor code is outmoded and not enforced consistently. The government has reduced energy subsidies and is ending some special tax breaks for agriculture.

Open MarketsView Methodology

Trade is extremely important to Ukraine’s economy; the combined value of exports and imports equals 105 percent of GDP. The average applied tariff rate is 1.9 percent. Nontariff barriers impede trade. Government openness to foreign investment is below average. The Russia–Ukraine conflict continues to interfere with trade and investment flows. The large number of nonperforming loans remains a drag on the banking system.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.70.2
2Ireland80.43.7
3Estonia78.8-0.3
4United Kingdom781.6
5Iceland772.6
6Denmark76.61.5
7Luxembourg76.40.5
8Sweden76.31.4
9Georgia76.20.2
10Netherlands76.20.4
11Lithuania75.3-0.5
12Norway74.30.3
13Czech Republic74.20.9
14Germany74.20.4
15Finland74.10.1
16Latvia73.6-1.2
17Austria71.8-0.5
18Macedonia71.30.6
19Romania69.4-0.3
20Armenia68.7-1.6
21Poland68.50.2
22Malta68.50.8
23Bulgaria68.30.4
24Cyprus67.8-0.1
25Belgium67.5-0.3
26Hungary 66.70.9
27Kosovo66.6-1.3
28Turkey65.40.2
29Slovakia65.3-0.4
30Spain65.11.5
31Slovenia64.85.6
32Albania64.50.1
33Montenegro64.32.3
34France63.90.6
35Portugal63.40.8
36Italy62.50.0
37Serbia 62.53.6
38Bosnia and Herzegovina61.41.2
39Croatia611.6
40Moldova58.40.4
41Russia58.21.1
42Belarus58.1-0.5
43Greece57.32.3
44Ukraine51.93.8
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