Wednesday, September 3, 2014

Results of Ukraine’s economic activity for the first six months of 2014 are bound to shock you.

Ukraine’s irrecoverable losses: statistics don’t lie

Results of Ukraine’s economic activity for the first six months of 2014 published by Goscomstat are bound to shock you. But more interesting is not the fall of GDP by 4.5% or the projected 7% loss in Gross Domestic Product but the hidden behind objective statistical data irrecoverable losses that eradicate Ukraine’s ability to get itself back on track in the long run.

First of all we are talking about the collapse of manufacturing which expedites the speed of the actual disaster. From January to July the rate of manufacturing fell 5.8% and just over July the industrial sector lost additional 12%. Mining industry took the biggest hit with a 28.7% loss, followed by car manufacturing (-23.8%), chemical (-22.2%), refining industry (-15.9%), rubber manufacturing (-13.8%), metallurgy (-12.3%) and furniture manufacturing (-12.5%). War-torn Lugansk and Donetsk Regions lost 56% and 28.5% of their manufacturing capacity. The crisis with components delivery from Donbass has in turn caused a shutdown of industrial giant ZAZ. The manufacturer lost 98.9% of its output and looks like it will close doors by October, leaving 21,000 workers unemployed.

Another factor eroding the manufacturing capacity is a drop in exports to Russia, which used to vary from 25% to 70% in different industries. For instance, the car exports dropped 40%, metallurgy by 32.6% and agriculture by 37%.

It’s also important to note that the horrifying statistical data also accounts for the period when Ukraine was governed by a legitimate government and economical ties with Russia were actively developed. After the cut-off in economic relationship with the Russian Federation by Kiev’s junta, manufacturing is in free-fall.

Situation of the agricultural sector, that Kiev places much hopes in, is not much better. In the first half of 2014 overall share of agricultural output in the country dropped 3.9%, food manufacturing – by 17.6%. Crops fell 30.1% over the last six months, grain production (not accounting for corn, for which the marketing cycle starts in September) fell over 50% and so on.

According to experts, gross grain harvest for the year will shrink by 10%, which will lower the export capacity by 7% and the Ukrainian agricultural sector is expected to sink by 10%-15% by the end of 2014.

Instead of focusing on food security for the country, in the second quarter of 2014 Ukraine increased its grain exports by 89.4% in comparison with the same period a year earlier. To effectively kill the industry, the government of A. Yatsenyuk cancelled the tax benefits for agricultural producers with revenues over 20 million hryvens and land reserve from 3,000 hectares. In reality it will affect almost 90% of agricultural processors in the country. Considering the fact that devaluation of hryvna increased the cost of production by about 45%, all of the aforementioned points pretty much seal the death sentence for what some thought could be Europe’s breadbasket.

Complete story at - Results of Ukraine’s economic activity for the first six months of 2014 are bound to shock you. — Novorossiya News Agency

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