(KIEV)-What a difference one year can make. In mid-2006, the Ukrainian government under then-Prime Minister Yekhanurov was flailing in terms of its economic standards. The country had dropped 10 points in the international competitiveness rating, falling from 77th to 88th in the list of 125.
It came as no surprise when Victor Yanukovich’s government, formed six months ago by “anti-crisis coalition” parties, placed competitiveness as a top economic priority. To achieve this quickly, export-friendly business conditions became overnight policy. A program entitled Competitive Ukraine took active steps in this direction. Yanukovich sees this approach as essential to the nation’s long-term economic growth.
Today macro-economic indicators support the conclusion that Yanukovich’s government has succeeded in overcoming the crisis it inherited from its predecessors and has begin to reverse negative trends. Yanukovich’s technocrats’ have bolstered metals and machine tool exports, while also ending the “milk-and-meat wars” that pushed the country to the brink of a food crisis. Other initiatives led to reduced unemployment and to a slow but steady growth of salaries and small business’ income. In turn, the government is promoting an institutional and regulatory environment that encourages domestic resources to rally effectively. Lower fiscal pressure has also put into play.
Observers point to the following positive developments on Yanukovich’s one-year economic report card:

• In the first half of 2006 under the previous government, fiscal receipts from the business sector accounted for 34.2% of the GNP. Today these have dropped a percentage point, and by 2007 are expected to be reduced to 30.2%. Stimulating the business is expected to lead to higher productivity and wages in the nearest future. The population’s income will grow due to higher competitiveness of major industries, rather than due to inflation.
• Yanukovich negotiated an advantageous natural gas deal with Russia for 2007 (55 billion cubic meters at $130 per cubic meter). This rate is not only the lowest in Europe; it is even lower than the one originally written into the budget. This deal rendered creation of a stabilization fund of $600 million unnecessary. Other steps created a situation where many goods whose price depends on fuel prices will become cheaper, which in turn further reduce inflation.

By making macro-economic stabilization a top priority, the Ukrainian government has gotten firmly on track for long-term economic stability. European experts are already beginning to voice new confidence regarding the Kiev economy. Typical of these reviews, the prestigious Fitch Rating Agency raised Ukraine’s rating from “stable” to “positive” on the basis of its second half performance in 2006, signaling satisfaction with the new government’s progress. As stability consolidates in the political sphere, planned economic development has significantly enhanced chances of attracting serious foreign investment, which could turn into another—even greater— achievement of the Yanukovich government.