As compared to 2005, real GDP in 2006 added 7% (a 2.7% rise in 2005). In comparison to the previous year, the economy showed notable upturn, though GDP indicator still has not reached the record-high figure of 2004 (12.1%). The highest increase of gross added value in 2006 was seen in trade, transportation, and construction sectors.

Industrial production sector

In December 2006, industrial output volumes added 12.0% versus December 2005. In 2006, industrial production rise was 6.2%, which is a double figure against 2005. The main contributors to improving dynamics of industrial production were metallurgy and metal working (+8.9% versus a 1.5% decline in 2005), as well as machine building (+11.8% vs. 7.1%).

Production upturn was seen in every main industrial segment, except for production of coke, oil refining sector, and light industry.

Machine building

A substantial growth of production volumes versus 2005 was reported by enterprises engineering automobile vehicles (+36.6%), control equipment and sensors (+28%), and metallurgical machinery (+17.8%). The year 2006 outran 2005 volumes in the production of agricultural produce processing machinery – by 14%, electrical machinery and devices – by 11.6%, and household articles – by 4.1%.

Metallurgy and metal working

By results of 2006, the industry showed production rise versus 2005 among producers of cast iron, steel, and ferroalloys (8.4%), tubes (12.8%), other kinds of primary working of cast iron and steel (12.6%), non-ferrous metals (2.6%), metallic casting (3.1%), and metal working (13.9%). By and large, production over 2006 embraced 32.9 mn tons of cast iron, 27.9 mn tons of steel, 13.7 mn tons of continuous casting semi-products, 22.4 mn tons of finished steel, as well as 2.8 mn tons of tubes and hollow sections out of ferrous metals.

Chemical and petrochemical industries

A 3.2% rise was reported upon the industry’s production volumes in 2006 if compared to 2005. The volume of chemical output rose by 0.9%, which was backed by high production of base chemicals – by 1.7%, pharmaceutical production – by 6.5%, as well as manufacturing of soap, perfumes, cleaning and polishing agents – by 3.1%.

Output did also go up in production of rubber and plastic articles – by correspondingly 0.8% and 15.8%. Output in 2006 also covered 7.1 mn tyres, 5.1 mn tons of synthetic ammonia, 2.6 mn tons of nitrogen mineral or chemical fertilizers, 183 ths. tons of caustic soda, and 165 ths. tons of acetic acid.

Food processing industry

Production volumes by the industry in 2006 added 10% in comparison to 2005. In particular, an upturn was seen at production of oil and fats (25.3%), sugar, meat, and tobacco sectors (correspondingly 34.9%, 13.6%, and 9.5%), fruit and vegetable processing (11.8%), production of drinks (9.6%), pasta (7.3%), and confectionery sector (0.7%).

Light industry

In 2006 the industry showed a 5-11% accretion versus 2005 in production of woolen fabrics, carpets, and women’s skirts. Leather and footwear production showed a 10.3% upturn of output. In general, 19.1 mn pairs of shoes were manufactured in 2006.

Communications and informatization field

By results of 2006, communications and IT industry are among domestic economic leaders.

Communications industry ended the last year as one of the leaders. Operators of all ownership forms provided communications services worth total UAH 33.5 bn, which was 22% up versus 2005, of these the value of services rendered to population came to UAH 13.3 bn. Consumption of communications services per Ukrainian citizen added nearly 22% up to UAH 284 as compared to UAH 233 seen in 2005.

The highest growth rates are attributed to services in: mobile communication (38.6%), TV and radio program transmission and broadcasting, as well as radio communication (26.7%) and computer connection (24.4%).

Within total volume of services, the largest shares belong to: almost 60% – mobile communications, 18.4% – long-distance and international communication, 9.5% – local phone communication, and 3.7% – computer network. Enterprises involved in key activities accomplished financial schedule indicators over 2006, have positive financial performance, and have completely fulfilled payments to the State Budget, Pension Fund, and other non-budget funds.

Payments in 2006 totaled UAH 6.1 bn covering taxes, duties, and obligatory proceedings to budgets of all levels and Pension fund. It is by nearly 30% higher than in 2005, to which state communications enterprises contributed UAH 0.6 bn (a 19.8% rise against 2005).

Communication enterprises, which are managed by the Ministry of Transportation and Communications, have no wage arrears. As of January 1, 2007, average monthly salary at key business enterprises grew by 21.4% reaching UAH 810.

5.5 ths. jobs were additionally created thanks to introduction of new profitable communications services, new technologies, launching of new sites and facilities, development of communications means and upgrade of equipment, as well as growth and expansion of commodity sales volumes. In particular, OJSC UkrTelekom created 4.4 ths. jobs, and UkrPochta State Mail Enterprise – more than a thousand.

Development of telecommunications and mail connection networks was fostered by sizable capital investments. Operators of all ownership forms put into production more than UAH 9 bn of capital investments, which was by 15.7% more than in 2005. As opposed to 2005, when gross volume was dominated by foreign investments, in the last year financial support from within the country accounted for 66% of investments into development of telecommunications and mail network sector. The industry preserved the tendency of growing volumes of direct foreign investments drawn to IT and communications industry.

Sizable investments encouraged upgrade and reconstructing of telecommunications network. Operators of all ownership forms have built and put into operation more than 617 ths. numbers of automatic telephone exchanges, including over 90 ths. in rural areas. Almost 98% of the commissioned facilities were the result of OJSC UkrTelekom activities. 515 ths. main phones were installed, including 421 ths. – to population, which also embraced more than 85 ths. – installed to privileged categories of citizens. It helped reduce the line for phone installation by a third. As of January 1, 2007, main phone density per 100 citizens was 26 units (25 units were fixed in early 2006).

Construction of modern optical fiber communication lines with introduced technologies CWDM and DWDM, as well as development of broadband access are the priority directions in telecommunications network development.

Based on optical fiber communication lines, some 3.4 ths. km of digital transportation communication network were put and commissioned. Within rural phone network, 98.6% of junction lines to rural automatic telephone exchanges have been organized by cable and optical fiber communication lines. They also completed digitalization of secondary network at long-distance level.

OJSC UkrTelekom introduced a number of new services, in particular: pre-paid card Vsesvit service; expanded the number of subscribers connected to Internet via ADSL technology – more than 6 times, started providing of a service in building of virtual private MPLS network; and offered additional services to subscribers of digital automatic telephone exchanges.

Access to Internet network expanded. They introduced services of high-speed Internet access (хDSL) and broadband access through cable TV system. Wireless Internet access zones (Wi-Fi and WiMAX technologies) have been expanding. As of January 1, 2007, for OJSC UkrTelekom alone the number of Wi-Fi objects increase 9 times versus early 2006 and reached 57 hot spots.

Today some 9 mn Ukrainian citizens use Internet services at different periodicity, the number of ua domains is 241.7 ths., and the number of web-sites exceeds 36 ths.

Demand for mobile communication has been fully satisfied.

TV and radio coverage of Ukraine’s area has notably expanded. Within networks of state TV and radio broadcasting: 37 new transmitters have been commissioned, 86 – replaced, 14 – updated, and 11 – recovered. The networks of commercial TV and radio broadcasting reported 47 new TV transmitters given for exploitation and technical service, 20 – replaced, and 3 – recovered.

As of January 1, 2007, the coverage of Ukrainian population with state TV networks was as follows: for UT-1 channel – 94.5%, UT-2 – 89.4%, and UT-3 – 83.1%.

267 km of radio-relay links were put into operation. Digital chains were organized within radio-relay link network for total length of almost 2 ths. km.

A number of steps were made for capital overhaul and constructing of mail communication sites, upgrade of technical means and motor vehicles, improvement of technical and technological infrastructure, and expanding of the range of new services.

After completing of construction, reconstruction, and capital overhaul, 111 objects of mail communications were commissioned, and 58 post offices were supplied with gas.

They have commissioned the new scheme of mainline routes of mail transportation as well as the system of motor transportation traffic monitoring. 184 vehicles were bought to upgrade motor stock for mail carriage.

In 2006, UkrPochta State Mail Enterprise maintained the set quality standards for written correspondence mailing between regional and district centers of Ukraine.

Upon joining the Agreement on mail payment services, the country became able to stir up development of mail financial service. By now, UkrPochta State Mail Enterprise has entered agreements with 24 countries worldwide. The signed agreements with 9 countries, which introduce the service of money transfer through electric communication network, helped receive more than UAH 12 mn of revenues. Introduction of E-transfer service will help reduce money transfer terms to receiver and will create competition to international money transfer systems like Western Union or Money Gram.

A number of steps were made to form positive international investment image and widely highlight positive shifts in IT and communication industry.

Transportation

Transportation companies carried 858.4 mn tons of freights in 2006, that is by 5.9% more than in 2005. Turnover of goods increased by 4.2% and amounted to 477.2 bn ton/km.

Carriage of freights by railway augmented by 5.9% versus 2005, including forward of freights by 5.1%. Cargo dispatch increased in all directions: Southern railway by 10.2%, South-Western railway – by 9.3%, Pridneprovskaya railway – by 6.3%, Donetsk railway – by 3.3%, Lvov railway – by 2.5%, and Odessa railway – by 2.1%. Carriage of construction materials augmented by 20.0%, cement – by 13.0%, ferrous metals – by 10.5%, coal – by 1.1%, and coke – by 2.6%. At the same time, dispatch of staple commodities diminished: oil and petrochemicals – by 12.5%, grain and grinding articles – by 20.1%, timber – by 2.3%, and chemical and mineral fertilizers – by 0/4%. Average daily unloading of cars increased in general by 5.7%, including by 9.9% in Lvov railway, by 8.5% in Pridneprovskaya railway, by 11.6% in South-Western railway, by 2.6% in Odessa railway, by 11.0% in Southern railway, and by 3.3% in Donetsk railway.

Domestic sea and river commercial fleet augmented cargo transportation by 7.1%. In aggregate, 23.0 mn tons of freights were shipped to customers. Carriage by river transportation increased by 11.1% against indices of 2005 and by sea transportation – by 1.1%. Foreign carriages of freights by sea transportation decreased by 3.2%, and by river transportation – by 1.3%. Cargo processing in commercial and fish ports and at industrial berths (sea and river) incremented by 3.7% making 157.5 mn tons. Processing of import carriages increased by 15.9%, transit carriages by 5.3%, and domestic carriages – by 18.9%. Processing of export carriages dropped by 2.9%. The number of processed foreign ships went up by 8.7% and constituted 17.9 ths. units.

Ground transportation (including carriages by individual businessmen) carried 154.8 mn tons of freights in 2006 that is by 22.8% more than in 2005. Its carriage turnover amounted to 25.3 bn ton/km and augmented by 28.3% because of long distance and international carriages.

Main pipelines transported 203.7 mn tons of carriages, that is by 4.2% less than in 2005. Transit of ammonia increased by 25.2%. Transportation of oil diminished by 3.8% and gas by 4.7%. Transit of ammonia augmented by 35.2% and oil by 5.8%. Transit of gas curtailed by 3.8%.

Approximately 4.5 bn of passengers used the services of passenger transportation. They were carried for the total of 116.3 bn passenger/km that is correspondingly by 3.6% and 4.4% more than in 2005.

Railway transportation in 2006 carried 448.8 mn of passengers that is by 0.7% more than in 2005. Forwarding of passengers increased by 6.9% in Odessa railway, 0.6% in South-Western railway, 1.1% in Pridneprovskaya railway, and 1.3% in Southern railway. At the same time, it decreased by 0.8% in Donetsk railway and 1.6% in Lvov railway. About 4.0 bn passengers used the services of automobile transportation (including carriages by individual businessmen) that is by 3.9% more than in 2005. Individual businessmen carried by 7.0% more passengers by ground transportation. Sea passenger carriages dropped in 2006 by 3.7% against the figures of 2005. Foreign sea passenger carriages went up by 28.5%. At the same time, river passenger carriages in 2006 diminished by 10.0%, while foreign river carriages – by 13.4%. Air passenger carriages amounted to 4.4 mn people, that is by 15.0% more than in 2005.

Population income

Nominal and real income of population

In January-November 2006, the nominal income of the population grew by 28.1% versus the respective period of 2005.

In January-November 2006, nominal available income, which the general population can use to buy commodities and pay for services, increased by 26.5% versus the respective figure of 2005, whereas the real available income of citizens, considering price factor, rose 16.3%. Per capita available income in November 2006 totaled UAH 558.9.

Real wage in January-November 2006 went up by 19.1% as compared to the respective period of 2005 (in January-November 2005 correspondingly – by 19.2%).

Labor market

Situation on labor market of Ukraine features is described with positive tendencies of employment growth and reduction of unemployment.

The number of economically active people between ages 15-70 in Ukraine (based on materials of economic activity sampling among population (families) on average over 9 months of 2006) came to 22.3 mn. Of these, 20.9 mn people were employed (20.7 mn in the respective period of 2005). Employment level in this age was 58.3% (on average in the 9 months of 2005 – 57.9%), including in rural area – 61.4%, in city area – 57.0%. As compared to the corresponding period of 2005, employment level did go up both among rural and city inhabitants. Employment volumes increased in overwhelming majority of the regions. The highest employment level was registered in the cities of Kiev and Sevastopol (63.6%), the lowest – in Ivano-Frankovsk and Ternopol regions (53.3%).

Economically active people also include individuals who were not employed, but were actively seeking it and were ready to get engaged, that is, following the methodology of International Labor Organization (ILO) they are defined as unemployed. The number of unemployed between ages 15-70 (in the ILO methodology) was 1.4 mn people (in the 9 months of 2005 – 1.6 mn people). Unemployment level (defined by ILO methodology) reduced by 0.6% down to 6.4% of economically active population (in the respective period of 2005 – 7.0%). Reduction of unemployment rate versus the respective period of 2005 was caused by narrower percentage of unemployed among city inhabitants – to 6.8% (-0.8%). It did not change among rural dwellers and remained at 5.5% of economically active population. Reduction of unemployment level was seen in all regions of the country, except for Ternopol region. The highest level of unemployment was fixed in Rivne region (9.0%), while the lowest – in the city of Sevastopol (3.3%).

The number of unemployed of productive age (according to the ILO methodology) amounted to 1.4 mn people or 6.9% of the relevant population (on average in the same period of 2005 – 7.6%).

The category of unemployed covers individuals in search of job on their own, as well as those registered in the State Employment Service.

Throughout 2006, the State Employment Service provided miscellaneous services and materials support to 2.7 mn citizens not involved in labor activities, of which 55% were women, 46% – young people in the age up to 35 years. Every third client of the employment service resided in rural area.

2006 saw intensive rise of demand for labor force: 270 ths. employers submitted information on available 2.3 mn vacancies to employment services. Therefore, the number of available jobs nearly matched with the number of unemployed people, who were seeking the job. However, because of territorial and professional-and-qualification imbalance, between labor force demand and its supply, only every second vacancy was completed. Quantity disproportion aggravated due to low quality features of the man power and available jobs. Among clients of the employment service, every third has never worked before or did not hold a job requesting special training; every fifth worked for no more than a year before applying to the employment service and has lost qualification. On the other hand, for every second vacancy the level of salary proposed was less than cost of living. Only for 9% of vacancies, the proposed salary was higher than the average in the corresponding region.

The number of people employed with the help of the State Employment Service was 1,070.8 ths. people (added 21.0 ths. versus 2005). The level of job placement of unemployed citizens increased in all regions, and the Ukrainian average made 39.7% (in 2005 – 36.4%). The highest level of job placement is attributed to young people in the age up to 35 (43.3%), it was harder to find jobs for people of pre-retirement age (job placement rate for them was 17%).

To increase competitiveness on the labor market, 203.4 ths. unemployed underwent professional training, re-training, or raising skills’ level – upon assistance of the State Employment Service (in 2005 – 193.3 ths.). Professional training involved every tenth unemployed person, and in the cities of Sevastopol and Kiev, which suffer the most shortage of qualified manpower, – even every fifth and every third unemployed.

All regions of Ukraine brisk up the work expanding citizens’ opportunities for employment through improvement of their professional knowledge and skills. Hence, training of unemployed was held upon 479 jobs and trades and considered demand of labor market and individual requirements of employers. Upon completing of professional training, 72% of unemployed were placed in jobs.

Professional orientation of citizens (especially youth, including school and college students) was held pursuing the goal of proper choice of profession taking into account real demand of labor market. More than 3 mn people were involved in professional orientation events.

Public paid works involved 437.4 ths. people (in 2005 – 419.2 ths.). In particular, in Nikolayev, Poltava, and Ternopol regions, the volume of public works increased by one tenth.

Throughout 2006, Ukraine had been fulfilling the Program of population employment for 2006 and solved the tasks defined by the Cabinet of Ministers of Ukraine in the field of population employment. Thanks to measures in fulfilling of the state population employment policy, the sphere of labor application was expanded by creating of new jobs for more than 1.1. mn people, which was 113.7% of annual task.

Agricultural sector

In 2006, gross volume of agricultural production versus 2005 added 0.4% supported by 4.2% rise at agricultural enterprises, while individual farms reported a decline by 2.1% (in 2005 – by 1.0%). The tendency shows gradual reduction of contributions by individual farms to gross agricultural production in the country.

Gross volume of own products sold by agrarian enterprises added 7% versus 2005 and included increase in plant growing production – by 4% and animal husbandry production – by 12%. Plant growing products contributed 61% to gross value of products sold, while cattle breeding added the remaining 39%.

Plant growing

Grain crop in Ukraine in 2006 curtailed by 9.9% against results of 2005 pursuant to preliminary information of the State Statistics Committee of Ukraine (down to 34.3 mn in reprocessing weight). In particular, harvest of wheat dropped by 25.4% versus 2005 down to 13.9 mn tons, rye – by 44.6% down to 0.6 mn tons, corn – by 10.4% (6.4 mn tons). Meanwhile, harvest of barley augmented by 26.4% up to 11.3 mn tons.

Grain crops, sunflower, and sugar beet were the most popular plants grown. They constituted a 75-80% share in commercial companies.

Commercial enterprises are still the main producers of grain crops, sunflower, and sugar beet, growing 75.8-78.9% of the plants, while personal farms produce 88.6-98.7% of fruits, berries, vegetables, and potatoes. It should be noted that the share of personal farms in the total production of grain crops, sugar beet, and sunflower has grown considerably since the beginning of land privatization and keeps increasing.

Commercial enterprises are still the main producers of grain crops, sunflower, and sugar beet, growing 75.8-78.9% of the plants, while personal farms produce 88.6-98.7% of fruits, berries, vegetables, and potatoes. It should be noted that the share of personal farms in the total production of grain crops, sugar beet, and sunflower has grown considerably since the beginning of land privatization and keeps increasing.

Export of grain from Ukraine constituted approximately 5.8 mn tons since the beginning of the current season (July 2006 till January 2007) against 8.6 mn tons over July-January 2005/06. In aggregate Ukraine exported 13.3 mn tons of grain in 2005/06.

Livestock raising

The livestock industry in Ukraine is less successful than farming, with profitability in this sector much lower than in raising crops. As a result, the size of herds has been declining steadily in the country for a number of years. This trend has leveled recently, and in some cases reversed. In particular, in 2006, the number of pigs grew significantly for the first time in a number of years. At the beginning of 2006, 7.0 mn heads were recorded, an 11% y-o-y increase in the pig population. Also, there is a clear tendency in Ukraine to increase poultry meat production. Naturally, this has resulted in a rise in poultry stock. The number of poultry increased by almost 30% in all categories over the last six years. Oppose to situation with pigs and poultry in Ukraine, farms still did not manage to stop the process of cattle herd curtailment. It again dropped by approximately 6% in 2005.

It should also be stated that previously individual farms increased the volume of herd size, while commercial farms curtailed it. The situation changed in 2005. Overall herd size increased by 22.3% over 2004, specifically with a 25.5% rise in pig numbers and 39.7% for poultry. Meanwhile, cattle still decreased by 1.4%. In general, lion’s share of Ukraine’s cattle raising production is concentrated in personal small holdings. As of beginning of 2007, individuals maintained 63% of cattle, 58% of pigs, and 54% of all poultry species. There are few commercial farms in Ukraine able to produce large volumes of livestock.