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Ukrainian Economy Grows Despite Political Problems

Ukraine has been experiencing impressive economic growth for most of this decade, despite political turmoil at the highest levels of government. VOA Correspondent Peter Fedynsky recently visited Ukraine and files this report about economic conditions there.

A steady stream of cement trucks regularly wind their way through the streets of Kyiv, a city in the midst of a building boom. Other signs of Ukraine's growing prosperity -- an impressive seven percent annual growth rate, trendy downtown shops, growing sales of luxury and off-road vehicles and increased purchasing power among consumers.

"The middle class is growing," says Tatiana Sytnyk, who is a senior analyst at GfK Ukraine, a market research company. Sytnyk says since 2006 40 percent of urban Ukrainians cannot only afford basic items such as food and clothes, but they can also save for larger purchases. This figure is up by one-third since 2003.

"Income distribution in Ukraine is being equalized. The rich remain rich, but at the same time, the least secure elements of society are getting wealthier," she added.

Increased purchasing power is fueling car sales throughout most of Ukraine, not only basic models, but luxury cars and low mileage sport utility vehicles.

Yaroslav Boyko is assistant sales manager at one of Kyiv's three Nissan car dealerships. "Our average customer understands that earlier cars, Russian models, are leaving the scene. Ours is a middle class buyer, who can afford something better than before, thanks to a wide range of credit programs offered today by banks and financial institutions," he said.

Analyst Sytnyk says retail trade, the service sector and the export of raw materials are fueling Ukraine's economic expansion.

The Danish home furnishing company Jusk has already opened nine stores in Ukraine and expects to open two more by the end of this year.

The company's general director in Ukraine, Yevhen Ivanytsia, notes consumption patterns in the wealthier cities. "If we talk about Yalta or Kyiv, people in those cities have passed the stage when a person needs to be fed, well-dressed, and respectable-looking. Now they are trying to make their homes cozy as well."

But in a sign of potential trouble, GfK's market research indicates wavering consumer confidence that could slow the economy. Company analysis shows many Ukrainians are spending money for big purchases now out of fear of a downturn later.

Ukraine's economic growth has come amid considerable turmoil in government -- frequent elections, charges of widespread corruption, disenchantment with leaders of the so-called "Orange Revolution" -- and protracted struggles to create a ruling coalition in Parliament.

Despite the country's ongoing political problems, a top university professor says Ukrainians have remained calm. Oleksiy Haran teaches political science at the Kyiv Mohyla Academy. "High level politics do, in fact, influence the economy, but economic processes as such have already been set in forward motion. This serves as a basis for optimism."

Ukrainian government statistics confirm the optimism -- wages are rising, unemployment is falling and household incomes are staying ahead of inflation. The challenge will be to maintain and even increase growth to catch up with the country's more prosperous neighbors in Central and Eastern Europe.