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Capital Markets

Ukraine sails back into favour

Strong growth, a successful sovereign bond deal and undervalued assets are turning Ukraine into the hottest new investment opportunity. Nick Parsons reports.

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AFTER CENTURIES SUBSUMED within the borders of the Soviet Union and recent years confined to the economic doghouse, Ukraine is emerging as the latest favourite destination on the global investment map.

Strong performance from nearly every industry in 2003 gave Ukraine a fourth successive year of GDP growth. At over 6%, that made the country one of the top performers in the world despite the worst harvest for 50 years.

The strong performance came as a surprise to some policymakers. After posting 4.8% growth in 2002 – down from 5.9% in 2000 and 9.1% in 2001– they predicted that the slowdown would continue in 2003. Such strong growth caught some unawares. Deputy prime minister and energy minister Vitaly Haiduk was fired early in December for the failure of the dilapidated power system to provide for the needs of the economy; he blamed it all on the unforeseen and inexplicable rise in industrial production.

Economic reform was already attracting inward investment. "The economy is expected to grow by 21% in the course of 2001 to 2003, while inflation is subdued at 12% to 13% in three years," Valeriy Khoroshovskiy, minister of economy and European integration, had told the IMF meeting in Dubai in September 2003.

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