Ukraine: Status Country Report July by Credo Line
Main economic tendencies
Economic activity during July 2014 as in previous periods continued to be negatively affected by political unrest, especially in Eastern Ukraine and related uncertainties. Currently significant improvement in Ukrainian industry performance is not expected. This is due to the fact that there are still factors that contribute to the decline of production. Among them, it is worth noting the situation in the east of the country, the recession in foreign markets and the reduction in domestic demand. Military operation in Donetsk and Lugansk regions not only disrupts the activities of large enterprises, but also breaks production chains. For example, many iron businesses are situated in Dnipropetrovsk and Poltava regions. However, they are directly dependent on supplies from the east. At the same time, the situation on foreign markets also worsens. Since the beginning of the year, prices for Ukrainian products and demand volumes are reduced. In June 2014 exports decreased by 11.6% (to USD 4.4 bln) compared to May 2014. However, trade surplus (USD 43.8 mln) during the first six months was saved. This contributed to the growth of exports of ferrous metals at USD 7.3 bln., crops at USD 3.0 bln. and some other commodity groups.
Domestic demand directly depends on the income of citizens. At the same time, real wages in June decreased by 5.4% compared to the same month last year. Currently, the state does not have resources to stimulate domestic demand. It should be noted that despite all the external factors, the observed decline in production is quite natural. This activity is the most undeveloped in Ukraine. Outdated technologies and equipment have led to a decrease in the share of industrial production in GDP to 25%. For six months of 2014 the decline in industrial production was 4.7%. The largest decrease was observed in Kiev (87.2%), Donetsk (87.7%), Sumy (88.3%), Cherkasy (89.9%), Poltava (91.0%), Kherson (92.6%) and Khmelnitsky (92.8%) regions.
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