World Economy

Agriculture Eases Ukraine Economic Pain

Agriculture Eases Ukraine Economic Pain
Agriculture Eases Ukraine Economic Pain

While Ukraine’s steel, heavy engineering and power sectors have been crippled by the war in the east and the economic crisis, agriculture has become the country’s leading source of export revenue and the only sector putting in a positive performance. Even so, farmers are facing difficulties from the sharp devaluation of Ukraine’s currency and a lack of access to credit  markets.

“Since  [Russia’s] aggression against Ukraine destroyed the industrial potential of Donetsk and Luhansk regions and caused a reduction in exports from the mechanical engineering and metallurgical complexes, the agricultural sphere has become a locomotive for export revenues,” Petro Poroshenko, Ukraine’s president, said on March 30 during a meeting of the country’s advisory body on reform.

Indeed, last year agriculture became the leading source of export revenue for Ukraine, worth $16.7b. Despite agricultural exports falling 2% from the year before, this sector surpassed metallurgy, whose exports dropped by 13% to $15.2b. “Such a dynamic was the result of a record harvest, which led to an increased volume of exports that cancelled out the negative [global] price environment,” Ivan Dzvinka, research associate at Kyiv-based Eavex Capital, told bne IntelliNews.

Agriculture was also the only economic sector showing a positive performance in 2014, at 2.9% growth, whilst the country’s economy as a whole shrank by 6.8%. “Other sectors demonstrated contraction by 10% and more,” Dzvinka notes.

However, 2015 will not be so positive. Kyiv-based experts expect agricultural exports to decline by 5-10% as a result of a predicted smaller harvest and “sluggish” global prices for agricultural products. Ukraine, which is the world’s sixth largest grain producer and third largest exporter of corn, produced 63.8m tons of grain in 2014.