The economy of Ukraine 5 years after Euromaidan

(To Andrea Gaspardo)
21/03/19

During a lesson in the macroeconomics course held at a prestigious university in northern Italy several years ago, a full professor of economics, who later became known in the Italian political and television debate, warned his students by saying: "Never trust the mere positive signs concerning the economy of a country, because even the dead cat bounces! ". The object of the dispute on that occasion was the "telephone prefix" performance of the Italian economy, but the same could be said about Ukraine.

Five years after Euromaidan's geopolitical earthquake, Ukraine is in a very "delicate", not to say disastrous, economic situation. Although the East European country has concluded the 2018 registering the third consecutive year of positive growth (+ 2,3% in the 2016, + 2,5% in the 2017 and + 3,5% in the 2018), this was not absolutely sufficient to bridge the disaster of the two-year period 2014-15 when the Ukrainian economy literally collapsed (-6,8% in 2014 and -12% in 2015). Also the forecasts on the reduction of inflation should not cheer up too much; if in fact the forecasts speak of inflation at the 7,3% (lower figure in this decade, if compared for example to the 14,4% of the 2017), the parallel forecasts on the economic trend (+ 2,9% for the 2019) testify the fact that, in Ukraine as in the rest of the world, market expectations are already reorienting in view of the arrival of the new great international financial and economic crisis which, between the summer of 2019 and that of the 2020, should hit the world economy.

Going to dig deeper, then trying to analyze the "quality" of the development of the Ukrainian economy, it is impossible not to notice that the country has lost 7 positions in the ranking of the most innovative economies according to the Bloomberg classification coming down from 46 number of 2018 to the 53 number of the 2019. The decline of the industrial sector can be appreciated in all its magnitude by looking at the data of those who were once the flagships of the country: the aerospace industry and the automotive industry.

The end of all military and civil cooperation programs with Russia in the aeronautical field has caused a decrease in the revenues of the aerospace sector of 80%, forcing the Kiev government to implement a merger between "Antonov Corporation" and "UkrOboronProm" while to save the iconic brand of the Soviet era (intervention that, if Ukraine were part of the EU, would be legally impossible because it qualified as "state aid"!).

But the real drama is what the automotive industry is experiencing. Thanks to its deep integration with the Russian market, the Ukrainian automotive industry had benefited from Russia's economic recovery in the 2000s, coming to produce 424.000 vehicles for civilian use in the 2008, thus reviving the glories of the Soviet era. However, the global economic crisis first and the aftermath of Euromaidan later struck with the violence of a hammer so much that, according to official data, in 2017 Ukraine has only produced 8.586 vehicles for civilian use. In April 2018, the association of all Ukrainian vehicle manufacturers, "Ukrautoprom", issued an official statement according to which "the automotive industries only work at 2% of their capacity, and the overall output of vehicles motor is the 98% lower than that of the 2008 ”; The Ukrainian automotive industry can today be said to be effectively defunct.

But then, what are the moderately positive performances of the Ukrainian economy over the last three years? Simple, from the agriculture boom! And this is the sad reality of the facts: with only the 5,8% of the workforce engaged and the 33,16% of exports in the 2016, agriculture has become the only sector of the economy that has managed to keep the country afloat in this dramatic period in its history. That guy was right: even the dead cat bounces!

Images: web / US Air Force