Where are $ 13 billion of Ukrainian export?

Author : Oleksandr Okhrymenko

Source : 112 Ukraine

Ukraine has signed the Association Agreement with the EU, but it’s main buyers are China and India
15:18, 11 September 2015

 Before speaking of Ukrainian export, let me remind that, according to the World Bank data, share of export makes near 50% in Ukrainian GDP, it is near to South Korea and Ireland, and more than GDP of Honduras, where it makes only 46%. Ukrainian economy is export-oriented, and when people say that it needs growth, firstly they must pay attention to export. This is our economy’s nature, without increase in the latter you won’t provide any miracle, even if speaking a lot. Ukrainian statistic service talked large that the foreign trade proficit for the first half of 2015 constituted near $ 2.3 million. Formally, it means that the National Bank could buy some currency on the market and strengthen its foreign exchange reserves. However, it hasn’t happened – according to the NBU data, for the first half of the year, the importers have sold $ 236 million, more than the exporters. Ukraine is obviously unlucky with export. 

Why there is such a difference? Statistic service counts the movement of goods and services abroad and from abroad, and the NBU counts currency inflow and outflow of foreign economic contracts. So, different kind of schemes shows it very well that the currency just does not come to Ukraine. But everyone pretends not to notice this.

But if there was only problem of currency outflow alone, it could be solved. There is another essential problem, with far more harmful outcomes. According to the Customs service data, in the period from January to August of 2015, Ukrainian export constituted only $ 24.8 billion. It is too little. In fact, it is $ 13 billion (or for 34%) lesser than the same index for 2014. Ukrainian export declines. It means outflow of GDP, currency gain, and thus the currency deficit is assured. Contrariwise, we need to increase the export for these billions. This might really provide the GDP growth and solve the problems of the country’s currency market.

According to the Customs service data, during the eight months of 2015 Ukraine mostly has sold on export corn (8.7% of total Ukrainian export), sunflower oil (7.8% of export), and semifinished steel products (with index of 6.9%).

economy Ukraine
After this, iron ore, rolled steel, wheat, soy, and ferroalloys come. As we see, Ukrainian export is, primarily, the one of grain and metal. And in this situation, falling prices of the mentioned products are extremely unfavorable, and the prices just fall. Because of worldwide oil prices drop, the metal prices fell for 22% and grain for 20% in the world market, and it continues to decline. The world economy is interconnected. Because when oil prices fall, whether we like it or not, prices for grain and metal, the main export potential of Ukraine, fall too. Ukraine itself cannot do anything in this situation. We can only increase the sales of goods abroad. They did so with grain, which this year was sold for 18% more than in the past, but this did not save situation - currency earnings were still lower. Metal demand in the world is falling, so this year Ukraine even had reduced sales of metal in physical volume by 24%. What is called, things are not going our way. Except of internal problems, external factors to harm Ukrainian export appeared.

For the eight months of 2015, export to Russia declined for 58%, or $ 4.3 billion. There is purposeful Russian policy to close its markets for the Ukrainian goods. Russia in fact wages a trade war against Ukraine, and tends to reduce our export.

In order to defend from Russian “trade aggression”, Ukraine reoriented to other markets, and that are markets of Asia, not Europe. So, the most corn we trade to China, Egypt is the second, and Spain is only the third. What about sunflower oil, the main purchasers are India, China, and Iran. Semifinished steel products mostly came to Egypt, Turkey, and Italy.

Asian countries now provide the most sales for Ukrainian export. For us, it is important to improve relations especially with those countries. Namely Asian economies allow Ukraine at least to partially compensate the loss of the Russian market.

Strange situation: Ukraine has signed the Association Agreement with the EU, but sells the most products to China and India. A paradox, I would say.

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