Recent reports from the State Statistical Committee (Reuters, August 16) show that Ukraine’s merchandise exports grew by 18 percent in the first half of this year to US$6.3 billion. In addition to helping to finance even more rapid (22 percent) growth in imports, this export growth is a major driver behind the strong turnaround in GDP (up 5.4 percent) and industrial production (up 11 percent) reported for the first five months of 2000 (Sotsial’no-Ekonomicheskoye Polozhenie Rossii, January-June 2000).
Although the most rapid export growth at mid-year was recorded on sales to Latvia (which were up 48 percent), the 40 percent growth in Ukraine’s exports to Russia was a key cause of the export boom. Russia remains Ukraine’s largest single trading partner, purchasing 23 percent of Ukraine’s exports. But Ukraine’s export boom apparently did not extend to other CIS markets: Sales to neighboring Belarus dropped 21 percent, and exports to Uzbekistan were off 42 percent. Ukrainian exports to EU and Central European countries surged instead. Sales to Austria, Greece, and France rose by 44, 34 and 22 percent, respectively, while exports to Hungary and the Czech Republic grew 39 and 27 percent, respectively. Ukrainian manufacturers clearly benefited from a weaker hryvnya, while exports to Russia benefited from the strong economic recovery there. Sales of ferrous and non-ferrous metals, as well as fertilizers, dominated the composition of Ukraine’s exports. By contrast, the share of grains and foodstuff exports–formerly a key Ukrainian export–dropped to less than 1 percent of total foreign sales.
These exports helped finance US$6.7 billion in imports during the first half of the year–a 22 percent increase. Most of this growth was concentrated in purchases of machinery and equipment, which meant sharp increases in imports from West European suppliers. Purchases from companies in the United Kingdom grew by over 40 percent in the first four months of 2000, while imports from Germany by 30 percent. But because nearly all of Ukraine’s energy imports continue to come from Russian companies, Russia remains the largest supplier of Ukrainian imports, with 47 percent of the total.
This robust import growth boosted Ukraine’s trade deficit to US$411 million at mid-year, well above the US$236 million deficit recorded as of mid-1999. But thanks to Ukraine’s strong export growth and the requirement that companies sell off 50 percent of their export receipts, foreign exchange reserves held by the National Bank of Ukraine (NBU) have remained relatively stable. After dipping slightly in early June due to debt repayment, NBU reserves by the end of the month had risen back to US$1.2 billion level. The NBU since January has purchased more then US$700 million on the foreign exchange market, in order to service Ukraine’s foreign debt.
ENERGY REFORMER TO GO?