Ukraine’s inflation rate stands at 16.1 percent, but has fluctuated by almost 25 percentage points in the last year. Inflation spiked because of a weak wheat harvest, global food competition, elevated energy costs and rising wages produced by rapid economic growth.
The government responded to the increases in food prices by restricting grain exports [PDF]. But the current food crisis in Ukraine — a country known as the breadbasket of Europe and the black-earth belt — presents challenges and opportunities. The cost of staple items like bread, eggs and vegetables increased by 20 to 70 percent.
High global prices and demand for grain result in reduced local supply, and therefore higher prices. Private investors are also lining up to buy and develop Ukrainian land, despite a legislative moratorium that prevents the sale of land.
Dave Marash reports from Kiev on Ukraine’s potential to open up land to private investors, feed the world and support its domestic economy.
10/12/2008 :: 05:34:14 PM
Vitaliy Says:
That’s a good question: what is the ratio of the Ukrainian work force employed by domestic vs. foreign owned businesses? I’m sure this information is somewhere on this site (http://www.ukrstat.gov.ua/), but would require further research.
Getting food at a decent/reasonable price is the million dollar question. Exporting locally grown agricultural products does indeed exert upward pressure on local prices (b/c of decreased supply). But for me the more important priority would be for the state to concentrate on managing the raging inflation in the country, which if I’m not mistaken is the highest in Europe and close to the one experienced in Venezuela. Holding down inflation to some reasonable level would go a long way in helping to make the food affordable.
Instead, the government has in the past resorted to placing export quotas on grain and other products. This works in the short-term, but tends to have a chilling effect on future investments.