Protest strains Ukraine economy

Many factories and businesses across Ukraine are at a standstill as employees join demonstrations in support of their preferred candidates.

"Now is not the time to work," says Yulia Tymoshenko, Mr. Yushchenko's radical running mate. "It's time to defend Ukraine. How can you study and work in a country the authorities want to rape?"

"Where will all these kids be in 10 years time?" asks businessman Yuri Gavrilyuk, looking wearily out of the window of his car at the crowds of Yushchenko supporters, many of them young people. "They should be getting their qualifications instead of partying on the streets. Every day of these protests is costing us money."

Indeed, according to Mr. Fiala of Dragon Capital, even the run-up to the elections on Nov. 21 was expensive as Yanukovich's government increased pensions to the detriment of the budget in the hope of attracting votes.

"And of course, the present uncertainly doesn't help," he said. "But if the political crisis is resolved soon, in a matter of weeks, there won't be any lasting effects. If it takes months, then there will be an effect, but even then it won't be on such a scale as in Russia in 1998."

Fiala says Ukraine had low debt and growing GDP, albeit from a low base. That growth might slow but would not turn negative, he says. And on the markets, demand remained healthy for Ukrainian stocks because most foreign investors predicted a peaceful outcome to the crisis.

If there were a revote and the Western-leaning Yushchenko won, the markets would welcome him as giving "the best chance of economic transparency and European values in the economy as well as society," Fiala says. "Even Yanukovich wouldn't be bad if, ultimately, he was elected legitimately."

Other economic analysts said that while some of Ukraine's banks were undercapitalized and weak, they were generally stronger than those of Russia in 1998. Indeed, before the present crisis, Ukraine's banks were stronger than those in Russia today. The role of the Central Bank would be crucial in preventing the situation from spinning out of control, they said.

They noted that growth had been strong at 10 percent from January to October this year, although it was bound to plummet when the figures came in for November. Inflation, which was just above 10 percent in October, is predicted to rise to between 12 and 15 percent by the end of the year.

The average monthly wage in Ukraine is the equivalent of $75. Officially, unemployment stands at 3.3 percent but international analysts put it at 9 percent for the second quarter of 2004. Many Ukrainians felt excluded when the European Union expanded eastward but stopped at their border earlier this year, and they still travel in large numbers as guest workers to Russia where they usually earn between $400 and $500 monthly.

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