Ukraine has been recovering from the disastrous economic decline which into which it was plunged by the crisis, which led to a 20% GDP decline y-o-y to 1Q 2009.

Recent numbers have been happier. Being dependent on exports, the Ukrainian industry has benefited from the ongoing revival of the global economy, and rising world steel prices in particular.

The big worry is Ukraine’s fiscal deficit.   The crisis badly hit revenue collections, in particular, tax collections, which were 13.4% y-o-y due to the recession (lower household income and enterprise profits, a drop in imports, etc.).

Then came the elections, and increased pre-election spending.  InOctober 2009, however, the Ukrainian authorities approved 20% increases in the minimum wage and pensions, which were enforced at the beginning of November. The social spending hikes, if fully implemented, could balloon Ukraine's overall fiscal deficit (including bank recapitalization, imbalances of the state-run natural gas company Naftogaz and pension fund) to more than 10% of GDP in both 2009 and 2010.

Despite this disastrous over-spending, inflation has continued to moderate due to the weak economy, but in November it was still 14%.

Read all about it in the SigmaBleyzer report.