Home / Economy / Trade with the EU collapses catastrophically: the economy of Ukraine in a week

Trade with the EU collapses catastrophically: the economy of Ukraine in a week

The main results and important events of economy of Ukraine over the past week


Ukrainian hryvnia continues to decline. And it seems that the currency can not decide to fall or to strengthen. On Friday, 11 March, the hryvnia has stabilized at historically strong for the last month mark — 25,51 UAH per dollar. Already by Wednesday, March 16, fell to $ 26,88 for, but by Friday, 18 March, again had a little back — up to 26,70 per dollar.
Торговля с ЕС катастрофически обваливается: экономика Украины за неделю
Economists see several reasons for this situation. First — the NBU started to enter the interbank market with relatively large interventions in the $50-60 million the Task of the NBU to keep the hryvnia within a certain range to prevent excessive attenuation, but also strengthening of the currency in the main Bank of Ukraine.

“By reducing the rate to $ 25.50 per dollar, the NBU is ready to redeem the currency from the market, quite reasonably arguing that the excessive strengthening of the hryvnia does not benefit exporters, but at the same time and replenishing the international reserves. In the medium term, the official rate will remain in the range of 25.5−27.3 UAH per dollar”, — says senior analyst “Alpari” Vadzim Iasub.

In addition, stopped the fall of the hryvnia is affected by the strengthening of currencies in the CIS countries. Despite the decline in trade relations, Ukraine is still experiencing the impact of the General economic situation in the post-Soviet space.

In turn, the expert, Executive Director of the blazer Foundation Oleh Ustenko in comments REGNUM expressed the view that the Ukrainian currency and the overall economy strongly influences the actual lack of dialogue with the IMF.

“The interbank foreign exchange market ceased to be real 100% status indicator of the hryvnia. The market is not competitive. NBU cuts the number of market participants who wish to buy foreign currency. In conditions when you don’t have free access to the market, to say that the course which has been exhibited is real, I wouldn’t. I believe that there are a number of factors that forced the hryvnia. This lack of foreign loans for this year for Ukraine.
There were a lot of statements that cooperation with the IMF is paused, and this will have a negative impact on the condition of the hryvnia at the expense of external issues. I appreciate the need for an external crediting of the Ukrainian economy this year at level of 10 billion dollars, of which 6 billion Ukraine could receive from the IMF. But if paused the collaboration with the Foundation, this means that Ukraine does not receive these and the remaining 4 billion. And on the hryvnia devaluation every day pressure”
— said Ustenko.

The fluctuation rate directly affect the cost of gasoline at Ukrainian filling stations, says the expert, the Deputy Director of STC “Psyche” Gennady Ryabtsev. According to him it is worth the hryvna to fall by 10 cents, after 2 weeks petrol is getting more expensive at 7 cents. Because about 85% of gasoline in the country is imported. However, in practice, gasoline at all actually synchronous with the currency. March 9 — 95-th gasoline at gas stations in Kiev — 19,23 hryvnia per liter. March 15 — 19,61 hryvnia per liter. The 16th is also the start of the drop in gasoline prices, and on 18 March the price of gasoline stuck in the middle — 19,41 hryvnia per liter.

Macroeconomic indicators

Earlier, Prime Minister of Ukraine Arseniy Yatsenyuk promised that Ukraine’s economy growth of 1-2% in 2016. But this week the Ministry of Economics has promised to officially revise this forecast.

“Not yet revised the projections for economic growth, although we admit that, maybe… maybe the deterioration in the first half, because we have a difficult situation with the transit, we have a difficult situation with the embargo, trade war, which goes with the Russian Federation. This affects our balance and our performance”, — said the first Deputy Minister of economy of Ukraine Nataliya Mykolska.

According to Oleg Ustenko, on the prospects of the Ukrainian economy affected by the external environment and the lack of reforms.

“Worsened external environment. Ukraine — export economy, from the export of half of Ukraine’s GDP. However, there are parameters that do not depend just on exports — for example, the quality of the investment climate. The country could absorb substantial resources for investment, but she doesn’t. Everything depends on structural reforms”, — said Ustenko.

The following official data in Ukraine in February 2016 compared with January 2016 registered deflation of 0.4%. In annual terms, by February 2015, the inflation rate in February 2016 decelerated to 32.7%. As explained in the government, the current deflation is due to the saturation of the domestic market due to trade restrictions from Russia, as well as low world prices for food products.


“Deflation caused by the saturation of the domestic market due to trade restrictions from Russia, as well as low world prices for food products. Additional factors of reduction of prices became low solvency of the population, the weakening of inflationary expectations, the decline in individual producer prices for finished goods, as well as tight monetary and fiscal policy. The main factor of acceleration of inflation may be the devaluation of the national currency due to the delay of financing from the International monetary Fund and political instability” — the report says the Ministry of economy.

Official statistics

Actually, Ukrainian exports fall in all directions.

According to published in the week 14-18 March the Ukrainian state Statistics service statistics trade relations between Ukraine and Russia worsened. In January the volume of export of Ukrainian goods to Russia dropped by 45.1% in comparison with indicators of January last year, to 160,6 million dollars. Imports declined by 57.6% to 268,3 million. And while Russia remains the largest Ukrainian trade partner. In the share of exports to Russia accounted for 7.9 per cent. In second place, Spain and Poland — they have 6.3%. Next are Turkey and China. For imports, the top five looks a little different: Russia, China, Germany, Belarus, Poland.

But most importantly, integration with Europe promised economic growth Ukraine has not yet yielded. January 1, 2016 came into full force on free trade Area Ukraine-EU.

“Compared to January last year, Ukraine’s exports tumbled by as much as 32%! Imports by 23%! Compared with January last it is better not to compare — there are colossal numbers. So what is most interesting, exports to the EU also decreased in comparison with January of 2015 by 12% and imports by 17%!”, — said the Director of the Center for Eurasian studies Vladimir Kornilov.

As a result, the exports from Ukraine to the EU — 950,9 million dollars, import — 963 million which Is significantly less than a year ago. All in all Ukraine in January received a negative trade balance — to 295 million dollars. For comparison, without the EU Association, in January 2015 the negative balance for Ukraine amounted to only 38.8 million.

“The decline in exports and imports depends on the quality of the business climate. There have been major shifts in the structure of exports. In 2012-2013, the share of Russia accounted for about a third of our exports. According to the results of last year — about 10% in the General structure of our exports, and the share of the EU increased dramatically. In 2013 it was at 25%. Now this mark exceeds 40%. There was a sharp change in the structure of exports. The fall of Ukrainian exports in the Russian direction was not offset by an increase in European. The tragedy of Ukraine is that in the presence of the FTA with the EU, we are not able to produce competitive products. In order to be competitive in any market, and the EU including the need to meet the criteria of quality and price. Your products will be competitive in any market if it is high quality and costs less than other products on the local market. To increase the quality of its products, it is necessary to have a technological upgrade, and this requires money and investment. But money no one will invest in the poor investment climate” — says the announced figures Oleg Ustenko.

Also this week published statistics, according to which Ukraine consumes and produces less energy. Experts stress that the overall drop in energy consumption is not connected with the cost-saving measures, like trying to apply power in Kiev — rather, it provoked a General decline of industry.

External factors

The head of the National Bank of Ukraine Valeria Gontareva believes that obtaining loans from the IMF interferes with the political crisis in the country. But as soon as the situation stabilizes in the government of Kiev will be able to get a tranche.

“The situation on the financial market now is more or less stable. I hope that stabilizes and the political situation in Ukraine. The government, in a new or old structure, will continue, and we will be able to resume cooperation with the International monetary Fund”, — said Gontareva.

But abroad not so optimistic. This week the U.S. assistant Secretary of state Victoria Nuland said that the IMF and Washington to lend Ukraine.

“The IMF and the U.S. government has no choice right now, until we are not sure who will be our partner on the other side of the table” — said Nuland.

However, the international monetary Fund excludes the termination of cooperation with Ukraine because of the current problems.

Check Also

Will America manage a soft landing in 2024?

Policymakers rarely bring down inflation without a recession. This time they might Could 2024 be …