Tuesday, September 30, 2003

For a long time the streets of Kiev have been full of Mercedes and BMWs. The abundance of these expensive cars gives the appearance of prosperity. Ukraine must be doing well if the streets look like showrooms for luxury cars. The problem with using this horde of affluence as an economic indicator is that it gives a very lopsided view of economy. The packs of Volvos and BMWs are being driven by the drivers of a very small minority of the population.

In the past year or so, another more important automobile trend has developed. The is an upsurge of new, small cars filling the streets. These Skodas and VWs are a great sign of a growing middle class who can afford to spend the $10k required to buy these cars. There is even credit available to finance these new cars. The ability to gather enough cash to purchase these cars and the willingness to spend it is a very good economic signal.

It would be a mistake to place too much value on the growth of the small car market but it is a reasonable indicator. The Ukrainian economy does not have many reliable economic indicators, so it is important to gather knowledge where you can. The rise of the Skodas is just such an indicator.

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