Ukraine’s exports to Central Asia fall 60-80% due to Russia’s embargo

Ukraine’s exports to Central Asian and Caucasus countries fell 60-80% yoy in January 2016, said Deputy Economy Minister Nataliya Mykolska, the pravda.com.ua news site reported on Feb. 25. Mykolska emphasized that Russia continues its economic aggression against Ukraine, imposing restrictions on transit of goods from Ukraine through its territory to Kazakhstan. She mentioned that now transit can be arranged only two days per week through two customs points at the Belarusian border, which significantly increases the transaction costs. These restrictions have been imposed by Russia in addition to the embargo on agro-products from Ukraine and the cancelation of the FTA agreement starting Jan. 1, she said.

Alexander Paraschiy: Ukraine’s exports to the former Soviet republics of Central Asia totaled USD 85 mln and USD 1163 mln in January 2015 and full-year 2015, respectively. These countries accounted for 3.1% of Ukraine’s total commodity exports last year. Exports to the Caucasus countries account for 2.2% of Ukraine’s commodity exports last year. While these markets are not critical for Ukraine, the limited access to them exacerbates the negative effects of Ukraine’s broader export problem. In particular, Ukraine has been suffering from a decline in export proceeds due to sluggish global commodity prices. We partially accounted for the consequences of transit problem in our trade forecasts for Ukraine in 2016; however, our basic assumption is that Ukrainian exporters will find workarounds, and exports to Central Asia and the Caucasus will recover over the coming months.  Thus far, we are keeping our initial forecast for exports of goods and services at USD 44.2 bln in 2016 (USD 47.4 bln in 2015) which suggests a USD 3.0 bln (3.6% of GDP) current account deficit by the end of the year.