Most Russians and Ukrainians are enjoying their best year in terms of income growth since independence. PlanEcon is forecasting 5.9 percent growth in GDP for Russia in 2000, and, after a decade of falling output, Ukraine’s first year of positive GDP growth since independence (4.2 percent). Growth is translating into higher living standards: A rise in real wages of 5.4 percent in Russia and by close to 3 percent in Ukraine is projected.
Improvements in living standards are wider spread than in the past. In Russia, rising GDP in 1999 and 2000 has been concentrated in extractive centers, industrial regions, and, to a lesser extent, agricultural areas. In prior years, Moscow and, to a lesser extent, Kyiv enjoyed economic growth while aggregate output fell in the rest of the economy. In 1997, average incomes in Moscow were four times those in the rest of the country. In the current period, growth in Moscow has lagged the country average. In Ukraine, incomes in Kyiv have risen, but incomes in some of the large industrial cities of the east have risen even more rapidly.
Pensions are also increasing in real terms. More importantly, the Russian and Ukrainian governments are paying pensions on time and eliminating arrears. In real terms, arrears on wages in Russia have been reduced by 59 percent in the first half of the year. Because government support payments have displaced direct subsidies to enterprises as the primary means of redistributing incomes in these countries, prompt payment of pensions and government salaries are key to the economic well being of rural areas. As younger people desert outlying regions to migrate to cities, government support payments will become increasingly important to poorer regions in the coming years.
BELARUS UNLIKELY TO GET IMF FUNDING AS ECONOMY HEADS TOWARD CONTRACTION.