Central and Eastern Europe (CEE) is facing its worst macroeconomic crisis since the post-Soviet transition, and while the region weathers the crisis its tourism industry will suffer. For Ukraine, which is among the countries worst affected, we expect the recession to subdue arrivals numbers in 2009, as the majority come from CEE. The report forecasts a 12% year-on-year (y-o-y) fall in tourism arrivals in 2009, after double-digit arrivals growth every year but two since 2002. Despite 2009’s bleak outlook, from 2010 to the end of our forecast period in 2013 we forecast the industry to return to double-digit growth.

The majority of tourists arrive in Ukraine via road or rail. The country is well-placed for land travel as it borders seven countries, including Russia. Transport via road is forecast to substantially outpace rail travel. This coincides with the recent visa liberalisation between the EU and Ukraine so that EU citizens no longer require a visa to enter the country for stays under 180 days.

Ukraine is set to co-host the 2012 UEFA European football championship (Euro 2012) with Poland, and this event is a key driver for the country’s tourism industry. Not only will it bring thousands of tourists to the country, but also the requirements to be chosen as a host for the competition include an array of infrastructure investment that can only be regarded as positive for the industry. UEFA has given Ukraine until November 2009 to make progress on building work on the Olympic Stadium in Kiev, airports and other infrastructure. The final decision of whether the country will host the championship will be made in 2011. Ukraine has said that it will allocate UAH76.2bn (US$15.14bn) for the construction and rehabilitation of roads, as well as the construction of dozens of hotels to make up for the lack of accommodation capacity, as part of the preparations for the event.

Although the Ukrainian hryvnia has stabilised recently, BMI expects the currency to sell off further before the end of the year. The hryvnia’s weakness is positive for the country’s tourism industry, as it has increased Ukraine’s price competitiveness.

Budget airline Wizz Air started offering services in Ukraine in 2008, and BMI expects the trend of lowcost carriers in the country to increase in the coming years. The authorities at Boryspil International Airport (KBP), which serves Kiev, are constructing another terminal exclusively for budget airlines. This would be a positive development in our view, as it would drive down fare prices, making travel within and to/from Ukraine more affordable, increasing tourism numbers. Wizz Air’s entrance to the market has already caused the largest Ukrainian carrier, AeroSvit, to reduce fares.

We do not expect the H1N1 flu (swine flu) pandemic to have a severe impact on Ukraine’s arrival numbers. Those concerned about the virus have generally been reassured by its moderate symptoms and relatively low mortality rate.