Ukraine has been hit hard by the global downturn and needed a rescue package from the IMF, but those private equity houses committed to the market say they aim to take advantage of a future upturn by acquiring well-priced attractive assets in 2009. Patrick McCurry reports.

A year ago Ukraine was increasingly being seen as an attractive market for private equity, thanks to a large and well-educated population, a fast-growing economy and closer links with Western Europe. The economy had been growing at around 7% a year and the country’s image had been boosted by the “Orange revolution” of 2004, in which peaceful protests led to the election of a new president and hopes that the country could create a viable working democracy.

But today it is a very different story. Ukraine’s main export is steel (non-precious metals accounted for 42.2% of exports in 2007) and the fall in world steel prices by two-thirds since last year’s peak means the country has been hit harder than many others by the global recession and credit crunch. Since last September, the local currency, the hryvnya has fallen dramatically, halving in value against the dollar. Unemployment is rising sharply and gross domestic product (GDP) is expected to shrink by 5%-10% in 2009, before making a slow recovery in the second half of 2010.

In April, the IMF downgraded its earlier forecast of a 6% contraction to an 8% fall in 2009, but predicted...

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