1. Economic developments in Ukraine in 2006 D. Shemetilo, West LB

2. Major risks for economy Political Legislative Demographic Economic

3. PR-OU coalition (50% prob) Building a state not a nation Targeting EU Consolidation of country by resolving the problem of Russian language and NATO Normalisation of relations with Russia Fiscal discipline Recovery of growth (5-6%) and lower inflation (7-8%)

4. “ORANGE” coalition (20% prob) Building a nation not a state Targeting NATO Growing tension in society Deterioration of relations with Russia Compensation of slow economic growth through social benefits High low growth (1-2%) and high inflation (12-13%)

5. Legal environment Development and harmonisation of the legislation using the EU as a nominal anchor Corporate legislation Legal enforcement Corruption

6. Economic Outlook Growth in services and domestic consumption Lower export growth Increase in FDI Three years for structural reforms

7. Economic Outlook 2006 GDP growth 2-3% 2006 CPI 10% Average UAH/USD5.05-5.09 2006 FDIUSD4-5bn

8. Impact of the gas agreement Positive for Ukraine Long term positive for industries Ukraine receives gas at USD95/thm3 Russia gains control over Ukrainian gas re-export and domestic gas distribution

9. Structure of Ukraine’s Industry Source: Ukraine’s MoE 2004

10. Ukraine’s gas balance Source: WestLB