MBS Blog

Although this data is a couple of years old, it provides an insightful perspective on possible trends for Ukraine…

Human Development Report 2009

Ukraine

The Human Development Index - going beyond income

Each year since 1990 the Human Development Report has published the human development index (HDI) which looks beyond GDP to a broader definition of well-being. The HDI provides a composite measure of three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and gross enrolment in education) and having a decent standard of living (measured by purchasing power parity, PPP, income). The index is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as gender or income inequality nor more difficult to measure concepts like respect for human rights and political freedoms. What it does provide is a broadened prism for viewing human progress and the complex relationship between income and well-being.

Of the components of the HDI, only income and gross enrolment are somewhat responsive to short term policy changes. For that reason, it is important to examine changes in the human development index over time. The human development index trends tell an important story in that respect. Between 2000 and 2007 Ukraine’s HDI rose by 0.76% annually from 0.754 to 0.796 today. HDI scores in all regions have increased progressively over the years (Figure 1) although all have experienced periods of slower growth or even reversals.

Figure 1: HDI Trends

This year’s HDI, which refers to 2007, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. The HDI for Ukraine is 0.796, which gives the country a rank of 85^th out of 182 countries with data (Table 1).

By looking at some of the most fundamental aspects of people’s lives and opportunities the HDI provides a much more complete picture of a country’s development than other indicators, such as GDP per capita. Figure 2 illustrates that countries on the same level of HDI can have very different levels of income or that countries with similar levels of income can have very different HDIs.

Figure 2: The human development index gives a more complete picture than income

Human poverty: focusing on the most deprived in multiple dimensions of poverty

The HDI measures the average progress of a country in human development. The Human Poverty Index (HPI-1), focuses on the proportion of people below certain threshold levels in each of the dimensions of the human development index - living a long and healthy life, having access to education, and a decent standard of living. By looking beyond income deprivation, the HPI-1 represents a multi-dimensional alternative to the $1.25 a day (PPP US$) poverty measure.

The HPI-1 value of 5.8% for Ukraine, ranks 21^st among 135 countries for which the index has been calculated.

The HPI-1 measures severe deprivation in health by the proportion of people who are not expected to survive to age 40. Education is measured by the adult illiteracy rate. And a decent standard of living is measured by the unweighted average of people not using an improved water source and the proportion of children under age 5 who are underweight for their age. Table 2 shows the values for these variables for Ukraine and compares them to other countries.

Building the capabilities of women

The HDI measures average achievements in a country, but it does not incorporate the degree of gender imbalance in these achievements. The gender-related development index (GDI), introduced in Human Development Report 1995, measures achievements in the same dimensions using the same indicators as the HDI but captures inequalities in achievement between women and men. It is simply the HDI adjusted downward for gender inequality. The greater the gender disparity in basic human development, the lower is a country’s GDI relative to its HDI.

Ukraine’s GDI value, 0.793 should be compared to its HDI value of 0.796. Its GDI value is 99.6% of its HDI value. Out of the 155 countries with both HDI and GDI values, 23 countries have a better ratio than Ukraine’s.

Table 3 shows how Ukraine’s ratio of GDI to HDI compares to other countries, and also shows its values for selected underlying indicators in the calculation of the GDI.

The gender empowerment measure (GEM) reveals whether women take an active part in economic and political life. It tracks the share of seats in parliament held by women; of female legislators, senior officials and managers; and of female professional and technical workers- and the gender disparity in earned income, reflecting economic independence. Differing from the GDI, the GEM exposes inequality in opportunities in selected areas.

Ukraine ranks 86^th out of 109 countries in the GEM, with a value of 0.461.

Migration

Every year, millions of people cross national or international borders seeking better living standards. Most migrants, internal and international, reap gains in the form of higher incomes, better access to education and health, and improved prospects for their children. Most of the world’s 195 million international migrants have moved from one developing country to another or between developed countries.

Ukraine has an emigration rate of 10.9%. The major continent of destination for migrants from Ukraine is Europe with 79.7% of emigrants living there.

The United States is host to nearly 40 million international migrants – more than any other country though as a share of total population it is Qatar which has the most migrants – more than 4 in every 5 people are migrants. In Ukraine, there are 5,390.6 thousand migrants which represent 11.5% of the total population.

Remittances

Remittances, which are usually sent to immediate family members who have stayed behind, are among the most direct benefits from migration; their benefits spread broadly into local economies. They also serve as foreign exchange earnings for the origin countries of migrants. However, remittances are unequally distributed. Of the total US$370 billion remitted in 2007, more than half went to countries in the medium human development category against less than one per cent to low human development countries. In 2007, US$4,503 million in remittances were sent to Ukraine. Average remittances per person were US$97, compared with the average for Central and Eastern Europe and the CIS of US$114. (See Table 6 for more details.)

Hryvnia Plunges the Most in Emerging Markets on Risk Concern

By Zijing Wu

Oct. 2 (Bloomberg) — Ukraine’s hryvnia slumped the most among developing-nation currencies as the default of NAK Naftogaz Ukrainy’s Eurobonds and collapse of the coalition government in neighboring Romania triggered investors’ risk concerns.

The hryvnia weakened 1.5 percent to 8.4858 per dollar, the steepest retreat among 27 emerging-market currencies, after plunging 1.8 percent yesterday, at 4:52 p.m. in Kiev. It is set for the biggest weekly decline in a month.

Naftogaz, the state-run energy company, missed a principal payment on its Eurobonds on Sept. 30. Fitch Ratings downgraded the company’s long-term debt to “restricted default” from C, the lowest grade before default level, according to a statement yesterday.

“The uncertainty over the Naftogaz issue is still weighing on the hryvnia,”Simon Quijano-Evans, head of emerging-markets strategy at Credit Agricole Cheuvreux in Vienna, said in an interview today. “Romania’s political situation also has an impact for currencies in the region.”

Romania’s President Traian Basescu yesterday approved the firing of Interior Minister Dan Nica from the Social Democrat Party and named Vasile Blagafrom the Liberal Democratic Party as interim minister, which prompted the resignation of Social Democrats from the cabinet.

The Romanian leu dropped 0.3 percent versus the euro.

“The hryvnia is vulnerable to any spillover from abroad because its backdrop is weak,” Quijano-Evans said.

Ukraine got a $16.4 billion International Monetary Fund bailout last year to avoid defaulting on its debt and stabilize its banking industry. Naftogaz, which operates the pipeline network that ships gas to Europe from Russia, has a 33 billion- hryvnia ($3.89 billion) budget deficit, Ukrainian President Viktor Yushchenko said in September.

(from www.bloomberg.com)