Foreign direct investment inflows and macroeconomic risks in Ukraine

The research focuses on the analysis of the foreign direct investment (hereinafter FDI) inflows to Ukraine and the macroeconomic risks connected with investing. According to the State Committee of Statistics, the largest FDI inflows to Ukraine as of January 1, 2011 were from Cyprus, with 22.2 per cent of cumulative FDI, Germany with 15.8 per cent, the Netherlands with 10.5 per cent, Russia with 7.6 per cent, Austria with 5.9 per cent, France with 5.3 per cent and the United Kingdom with 5.1 per cent. The lion’s share of FDI to Ukraine was invested in the financial services and industry sector: USD 15 billion or 33.7 per cent of total FDI and USD 14 billion or 31.4 per cent of total FDI respectively. There are several key macroeconomic risks for foreign investors to Ukrainian economy. The critical external factors for Ukraine’s economy include global commodities prices, primarily steel and oil and global appetite for emerging markets debt. Regardless before mentioned risks, according to the United Nations trade and development body annual report on global FDI, Ukraine is the leader among the Commonwealth of Independent States (hereinafter CIS) countries in the FDI growth. FDI flow into Ukrainian economy increased by 35 per cent up to USD 6.5 billion in 2010, making Ukraine one of the leading investment recipients in the CIS region. Recently, the global rating agency Fitch Ratings raised Ukraine s long-term foreign credit rating from stable to positive. Notably, according to the World Investment Report 2011, the Ukrainian FDI flow constitutes 23 per cent of gross fixed capital formation. At the same time, the average rate for the CIS is 15.1 per cent and for the world – 9.1 per cent.