As Ukraine and Russia are done guessing about Putin’s disappearance, it makes sense to consider what is going on in the two countries’ economies. We have said a number of times that this war, just like any other, is not only fought on the battlefields, but also on the financial and other markets.
The war is now exactly one year old. Considering the state of the Ukrainian economy one year ago, when it already had been severely damaged by the global crisis and years of looting by the Yanukovych thugs, the fact that Ukraine is still able to fight the war which takes dozens of millions of dollars daily, is quite amazing. Yes, the war has brought Ukraine to the brink of insolvency, and the IMF is basically throwing the country a lifeline with USD 5 billion which have already been allocated last week and another USD 5 billion coming later in the year.
But we need to realize that the country has lost more than 20% of its industrial capacity, and most of that is lost for good. Tens of thousands of acres in the war zone and surrounding areas are now filled with land mines and will not be cultivated for years. On this background, the decline of Ukraine’s GDP in 2014 amounted to just 6.7%. The decline will likely steepen in 2015 as the drop in the last quarter of 2014 was at 15%. However, the IMF expects that Ukraine’s economy will grow by 2% in 2016.
Unlike Ukraine, Russia has not been damaged by the war. But it is suffering from a triple whammy – high military spending, western financial sanctions and low oil prices. Russia’s GDP dropped by 1.1% and its oil revenues went down 42% in January this year (although in physical terms its oil exports rose 8.5%). Russia’s natural gas exports in January dropped by 29% in physical terms and by 42% financially. Are these numbers behind Putin’s disappearance? All the experts, regardless of whether they are saying that Putin is overthrown or still in power, think so. The price for oil, which has resumed its decline, seems to be on Ukraine’s side, at least for now.
By:
Ukrainian Credit Union Limited
But we need to realize that the country has lost more than 20% of its industrial capacity, and most of that is lost for good. Tens of thousands of acres in the war zone and surrounding areas are now filled with land mines and will not be cultivated for years. On this background, the decline of Ukraine’s GDP in 2014 amounted to just 6.7%. The decline will likely steepen in 2015 as the drop in the last quarter of 2014 was at 15%. However, the IMF expects that Ukraine’s economy will grow by 2% in 2016.
Unlike Ukraine, Russia has not been damaged by the war. But it is suffering from a triple whammy – high military spending, western financial sanctions and low oil prices. Russia’s GDP dropped by 1.1% and its oil revenues went down 42% in January this year (although in physical terms its oil exports rose 8.5%). Russia’s natural gas exports in January dropped by 29% in physical terms and by 42% financially. Are these numbers behind Putin’s disappearance? All the experts, regardless of whether they are saying that Putin is overthrown or still in power, think so. The price for oil, which has resumed its decline, seems to be on Ukraine’s side, at least for now.
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