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  • Writer's pictureOleksii Kushch

The economic situation in Ukraine. Thematic issue: foreign trade.

Author – Oleksiy Kushch


Statistical data on trade turnover and its structure make it possible to assess the impact of the war on the economy and the effectiveness of state amortization measures to minimize the crisis.


Data indicates a drop in Ukraine’s export potential by 30-35% and an increase in the economy's import dependence by 15-20%.


Commodity Pattern of Foreign Trade of Ukraine, January-September 2022


Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and the city of Sevastopol and part of temporarily occupied territories in the Donetsk and Luhansk regions.

 

Note. In some cases, the sum of the components may not be equal to the result due to rounding data. The export of goods from Ukraine for the nine months of 2022 amounted to 33 billion dollars or 68.6% of the volume of the same period last year.


Hence, the drop in exports constituted over 31%.


The import of goods to Ukraine for the nine months of 2022 amounted to 38.5 billion dollars (or 76.3%) of the volume in the same period last year.


Thus, the fall in exports amounted to more than 23%.


Lower rates of decline in import supplies led to the growth of the trade deficit to 5.5 billion dollars.


This is the result of a sharp drop in domestic production (energy crisis, destruction of assets, loss of sales markets, reduction in logistics and transport communications), as well as an increase in supplies of critical imports to Ukraine.


Given import deduction, relative increases in imports and decreases in exports will play a role in accelerating the pace of economic decline (decrease in GDP) in 2022.


At this time, the trade deficit will be compensated by international financial aid and foreign loans. However, during the post-war recovery, the expansion of the trade deficit will serve as one of the main factors contributing to low rates of economic growth.


The war crisis in 2022 differs significantly from the pandemic crisis factors in 2020, when the most significant relative decline was in the import rather than the export segment.


Regional volumes of foreign trade in Goods, January-September 2022


Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and a part of temporarily occupied territories in the Donetsk and Luhansk regions.

Including natural gas supply undistributed among regions.

 

Note. In some cases, the sum of the components may not be equal to the result due to rounding data.

Volume, price and terms of trade indices for merchandise trade of Ukraine, September 2022

(to corresponding month of previous year)


Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and the city of Sevastopol and part of temporarily occupied territories in the Donetsk and Luhansk regions.


The index of terms of trade by volume for nine months of 2022 was 136.5%, and the similar index by prices was only 69.2%, which indicates that the physical volume of exports significantly exceeds the price parameters, which, in turn, prevails in import structure.


This ratio is explained by the predominance of raw materials in exports and goods with high-added value in imports.


Summary:


State measures like the Istanbul Grain Initiative (initiated by President of Ukraine Volodymyr Zelensky) partly cushion the export crisis by expanding existing logistics, transport opportunities, and corridors.


Export indicators of grain and other raw materials are 10-20% higher than the weighted average export indicators for all commodity groups.


At the same time, the export crisis is one of the primary challenges of the current economic crisis, which is the deepest in the modern history of Ukraine since the 2000s.


The help of Western partners at this stage also results in an increase in the import dependence of the Ukrainian economy.


With the help of the so-called export method of estimating the drop in GDP, one can determine that the economic decrease in the first nine months of 2022 was at 30-35% and more than 40% at the end of the year.


Економічна ситуація в Україні Тематичний випуск зовнішня торгівля
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