Steel prices and growth

IMF has prepared the report on Ukraine in June 2008, just before the crisis began. It is still relevant due to the main policy recommendation: there is a global downward trend in the relative prices of commodities, and the main commodity that Ukraine exports is steel. To break the influence of highly volatile in the short run, and declining in the long run price of steel, the first two steps are flexible ER and a counter-cyclical fiscal policy.

Here are some facts

During an economic upswing, an increase in steel prices by 10% speeds up a growth rate in Ukraine by 1.5% but the effect dies out in about a quarter. Consider how the steel prices were changing during 2000-2008

The 2004 has been the peak year when growth in steel prices contributed the most: due to 40% increase in steel prices the GDP growth was somewhat 6% than without this hike price.