Monday, March 28, 2016

Update on the Russo-Ukrainian economic war

We have been following closely the developments of the economic dimension of the Russian aggression against Ukraine. Both economies have not done well since the beginning of the aggression in March 2014. But it seems that Ukraine’s economy is continuing its upward trend as greenshoots are becoming visible, as we mentioned back in early February. This time, Ukraine's State Statistics Service reported that, in February 2016, the country's industrial output grew by 7.6% over February 2015. If adjusted to the normal number of days in February, the growth amounted to 4.9%. According to, it was the first monthly year-over-year growth in Ukraine's industrial output in a very long while, since July 2012. In January-February 2016, the growth amounted to 2.9% over the same period of 2015. As positive as these numbers may seem, the unreformed and war-stricken Ukrainian economy is still far from a full-fledged recovery.

In Russia, the industrial output in February grew by 1% as compared to February 2015. But if adjusted to the number of days, the output actually fell by 1.6%. In January-February, output was also down, by 0.4%, year-over-year.

Although the rate of decline in industrial output in Russia has been slowly going down over the past several months, it is evident that the Russian economy is still in a state of decline. This is why the Russian leadership is so desperate to lift or at least relax the Western sanctions. Russia is using any "excuse" to talk the West into easing the sanctions - from the terror attacks in Europe to Ukraine's "noncompliance" with the Minsk agreements. The desperation is obvious given the forecasts of many experts that the Russian economy may not survive beyond 2016. And some European countries are reportedly ready to meet Russia's demands, at least partly, either out of the fear of a Russian collapse, or just for the sake of short-term "benefits" for their economies. Tough times for Ukraine never seem to end.

Ukrainian Credit Union Limited

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