The final paper for ukrainian - Essay Example

Ukraine hoped to would become a member of the Organization for Economic Cooperation and Development (OECD), the North Atlantic Treaty Organization (NATO), and European Union (EU). However, Ukraine has never fulfilled these expectations. From the year 2000 to the Orange revolution that occurred in 2004, the per capita GDP of Ukraine rose as compared to the GDP of its neighboring countries. The GDP rose from 61% to 68% (DeBardeleben and Crina 67). However, Ukraine’s GPD in 2013 declined precipitously.

Notably, Ukraine’s economy was in recession in 2013. This recession has been noted to have increased in 2014 where the economy of Ukraine has experienced a 7% to 10% drop. This abrupt crisis is associated with the falling of average income and decline in the real GDP of Ukraine. The crisis is best evident in the collapse of the Ukrainian currency and the reduction of its foreign currency reserve. Notably, if a country’s currency collapses and there is little foreign exchange reserve obtainable, the crisis will escalate swiftly.

However, since the beginning of this year, the Ukrainian currency has dropped by 20% in relative to the US dollar. This means that there is rising inflation for all the imported goods, less investment by businesses located in Ukraine, slower economic growth as less consumption spending by the Ukrainians. The collapse of the currency also means that the Ukrainian central bank has to raise the domestic interest rates. The rise in the domestic interest rates will slow the economy as the domestic investment and consumption decline further.

The raising of the rates will decipher into slow direct foreign investment into the country. The collapse of Ukrainian currency is worsened by the loss if foreign currency reserve. Notably, foreign exchange is needed for making payments on bonds to the foreign investors