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Thursday, February 22, 2018

In a catastrophic drop in exports could only blame myself

The Ukrainian government has reported the export figures for the first two months of the current year. The results are bleak: exports falls dramatically and its structure is changing dramatically – Ukraine is becoming a poverty-stricken agricultural country. To blame, according to Kiev, Russia again.

The Ministry of economic development and trade of Ukraine summed up the results of two months of 2016, according to Ukrainian exports. The miracle did not happen. Earned in full force on the Association of Ukraine with the EU is not brought to Kiev nothing but disappointment.

“Ukraine has lost about 98 billion due to the introduction of restrictions in trade relations with Russia”

With the beginning of the year the export of Ukrainian goods decreased by 21.3% to 4.7 billion dollars, imports fell by 12.8% to $ 5.5 billion (including crude petroleum and natural gas). While exports constitute half of GDP.

I wonder what the outcome of the Ukrainian economic Ministry blames exclusively foreign factor, and especially Russia. Thus, the published infographic of economic development and trade of Ukraine said that in the fall of Ukrainian exports to blame restrictions on the transit of goods through Russian territory, as well as an embargo on Ukrainian products. Two more reasons – military events in new Russia and “annexation” of the Russian Federation the Republic of Crimea and Sevastopol.

Earlier, Ukraine has tried to shift the blame on Russia even for hyperinflation, now for export. Meanwhile, the insurgent Ukrainian regions in Kiev lost only through their own short-sighted policy.

Indeed Russia has imposed on Ukraine trade restrictions – but Moscow for two years has warned of the risk of loss of the Russian market for Ukrainian exporters. And to the last tried at the tripartite talks to find a compromise that would eliminate the need for the abrogation of the free trade zone of Ukraine in the framework of the CIS.

Finally, it was the first Kiev joined Western sanctions against Russia, knowing in advance what will be the response of Moscow. Russia responded (only half a year later) embargo on food (as in the case of the EU).

The structure of Ukrainian exports shows that Ukraine has become a predominantly agricultural country. The largest share (43%) in its exports is agricultural products and food industry. Metallurgy is now only 22%, engineering – 12%. A few years ago metallurgy was the leading export sector of Ukraine.

Such results are also a consequence of the rupture of trade and industrial cooperation with Russia. Played a role, and the destruction of the forces of ATO industry of Donetsk and Lugansk who tried to escape from the shackles of Kiev that is configured to destroy their decades-established business with Russia.

According to the infographic, Ukrainian exports not just falling, but coming down double digits. Most of all fell the export of mineral products – by 40% in two months, to 314 million dollars. Not far behind metallurgical and chemical industry, which declined by 35% and 33%, respectively ($1 billion and $ 275 million). Machinery exports fell by 15% to $ 559 million, agriculture by 11%, to $ 2 billion. The export of timber and light industry is also a significant minus.

However, there are some goods, which are exported from Ukraine is growing. That’s just a list of these products, first, small, and secondly, again confirms the fact that Ukraine is the strongest economy in the post-Soviet space has turned into a weak agricultural. Growing exports of sunflower and soybean oil, tomatoes, poultry, sugar, cake plus timber, parts of aircraft and radar and navigation equipment. Everything else goes down.

Today at growing the food situation, too, may soon change dramatically and go into minus because of the quota on duty-free exports to the EU have already ended. And Brussels to increase their not going to.

“Hardly anyone will dispute the truism: to put on foreign markets of raw materials short-sighted and impractical. The status of a raw appendage humiliating for Ukraine as a country the economy of which 12 years ago was considered the most promising in the post-Soviet space. Today individual members of the European team finally starting to see the light: the FTA with the EU is nothing more than a hoax, and Ukraine is interested in the West only as a supplier of cheap raw materials”, – says Dmitry Medvedchuk “Ukrainian choice”.

Kiev did not want to trade and business with Russia, which he calls an aggressor. He almost achieved this, but now complains that this country is the aggressor allegedly to blame for the fact that Ukrainian exports falls.

Ukraine has lost about 98 billion due to the introduction of restrictions in trade relations with Russia, considered the Ukrainian office. If earlier Russia was the largest trading partner of Ukraine, now the volume of trade fell to 12.7% in 2015 (in 2012 was approximately 24.3 per cent). The share of exports to the EU increased from 22.3% in 2012 to 34.1% in 2015.

For the first two months of 2016, the situation is even more revealing. The EU’s share in Ukrainian exports has 44% and the share of Russia – 8%. However, it’s still the two largest trading partner. In third place is China with a share of 7%, followed by Turkey (6%), Egypt (5%) and India (4.8 per cent). The share of other countries 1 to 2%.

Ukraine would like to say that exports to the EU is growing, but in fact it is not. Ukrainian exports sharply reduced not only in Russia, but absolutely in all the above countries. So, for two months the exports to Russia fell by $ 230 million, Turkey – $ 187 million, in Egypt – at $ 163 million, in China – 115 million dollars, in the EU by 45 million dollars. According to the logic of the Ukrainian economic development and trade, the drop in Ukrainian exports are to blame not only Russia, but then Europe and China, and Turkey, and Egypt, and India. But these countries did not impose any restrictions on the export of Ukrainian goods, and the EU all supposedly opened its market for Ukrainians.

All this shows that the causes of destruction are rooted in the economic policy of the Ukrainian government. Bet on Association with EU and a free trade zone with the EU, to Russophobia, on the implementation of the economic prescriptions of the IMF were losing.

The Ukrainian business is still trying to climb out of the pit, trying to discover new markets, to have something to sell. In a number of countries in Ukrainian exports grew. Only markets, mainly Asian, there is a small increase (in comparison with the fall on the other) and does not cover the loss of the traditional market.

In addition to Russia, as the reasons for the decline in exports, the economic development and trade of Ukraine calls, finally, for economic reasons. This reduction of demand for Ukrainian products and the adverse pricing environment in the traditional commodity markets. But when the national Bank of Ukraine the hryvnia has fallen off at the behest of the IMF promised that the devaluation will ensure the growth of exports. But that demand was growing up, it is not necessary to close at least existing markets. The weakness of the world economy in any case would have a negative impact on Ukrainian export, but not as catastrophic. A good example is Belarus whose export is almost completely tied to the Russian market. It probably comes on the fall in grain prices on world markets or on the metal. Although again the devaluation to compensate for this nuance. In Russia, for example, metallurgists successfully offset by falling prices on world markets due to the devaluation of the ruble.

From the fall of oil prices Ukraine as an importer of energy resources had to blossom. Instead, Kiev buys premium European reverse gas, enriching European intermediaries rather than their own economy.

Two more reasons for the failure of exports, according to the economic development and trade of Ukraine – the worsening financial condition of domestic enterprises and access to credit and higher production costs of domestic products. This is a consequence of the same disastrous economic policy of Kiev and errors of the national Bank of Ukraine, who crashed not only the hryvnia, but also the country’s financial sector.

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