Russian Invasion Constricts Ukraine Exports, Triples Deficit

Before Russia’s full-scale invasion, Ukraine’s exports were a reason to celebrate. Last year, the country hit a 10-year record with $68 billion in exports. As Russia’s invasion enters its seventh month, no one can predict when Ukraine can expect to post these kinds of results again, Natalia Datskevych reported for Kyiv Independent.

Photo Insert: The National Bank of Ukraine

According to Ukraine’s State Statistics Service, for the first half of the year, the country’s exports decreased by a quarter to $22.7 billion, with imports falling to $25.2 billion, or a 20% decrease year-over-year.

Following this downward trend, as of July, the trade deficit has almost tripled compared to the same period last year, reaching $4.3 billion, Ukraine’s State Customs Service reported.

Russia’s Black Sea blockade of Ukraine’s ports led to billions in losses for the country’s revenue. Before Russia’s full-scale invasion, grain exports accounted for 40% of Ukraine’s foreign exchange earnings.

While grain exports resumed in August after a United Nations-backed deal ended the blockade, the results are still modest. For the first eight months of the year, Ukraine exported 3.6 million tons of grain, over 50% less than during the same period last year, the Agriculture Ministry reported.

Ukraine’s second-largest source of export earnings, metal products, has also been knocked out by Russia’s invasion. In the first half of the year, exports of metal products decreased by 47%, to $3.2 billion. Metallurgy producers have only been able to sell 4.1 million tons, almost 60% less compared to 2021.

By the end of this year, metal exports may see a decline of three to six times compared to last year, to just $3.6-7.2 billion, Dmytro Khoroshun, an analyst at Concorde Capital, forecasted.

In 2021, metal exports reached $21.1 billion, a third of all of Ukraine’s exports. Other industries, such as pharmaceuticals, clothing, or the IT sector, managed to escape such a catastrophic decrease in exports.

A drop in the export of Ukrainian-produced shoes and clothing was only 10% compared to the previous year, reaching almost $450 million.

Pharmaceutical exports dropped by 23% in the first half of the year, reaching only $102 million – mainly due to the shutdown of factories in Kharkiv, a regional capital in eastern Ukraine under constant shelling by Russia.

Against all odds, the country's IT sector has shown growth and resilience during the war.

According to the IT Ukraine Association, the export of tech services for the first half of the year reached $3.74 billion, 23% more than for the same period of the previous year. In 2021, the IT sector generated about 4% of the country's gross domestic product and had $6.8 billion in exports.

With the beginning of Russia’s full-scale war, the industry was able to react quickly, solve logistical problems and move offices to the western regions of the country or even abroad.

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