Ukrainian exports are gradually recovering after a significant drop. Its indicator for the first half of 2024 increased by 7%. Instead, imports remain at the previous level.
Since independence, our country has been importing more goods than exporting. During the war, this imbalance became even more pronounced. The negative balance reached $20.9 billion in 2023. We remind our readers that the trade balance is the difference between the value of exported and imported goods and services. If exports exceed imports, the balance is positive (surplus). If imports exceed exports, the balance is negative (deficit). It is clear that a negative balance indicator can cause significant economic consequences, in particular, for the national currency. A permanent deficit in the trade balance can lead to a weakening of the hryvnia, especially now, when the inflow of foreign currency in the form of investments and remittances is much more difficult. However, during the current year, this figure decreased to $19.2 billion.
It is obvious that today, in the conditions of global economic and political challenges, Ukraine is actively working to restore export flows.
The key articles of Ukrainian exports are traditionally food, in particular grain crops, as well as metals. Cereal crops such as wheat and corn make up a significant portion of Ukrainian exports and are an important source of income for the country. Metals, in particular steel and iron, also play a critical role in Ukraine’s foreign economic activity, providing a significant part of foreign exchange earnings.
However, the volume of these export goods largely depends on the efficiency of logistics routes, which, unfortunately, remain complicated due to ongoing hostilities. The war and its consequences lead to significant problems in the transport infrastructure, which makes it difficult to deliver goods to international markets. This leads to delivery delays, increased transportation costs and, as a result, potential losses for Ukrainian exporters.
According to the data “Vox Ukraine” the export of a number of commodity and raw material categories decreased many times. For example, the export of flat products fell almost tenfold – from 437,000 tons in February 2022 to 47,000 tons in March 2022. Some items of metallurgy were not exported at all. This sharp drop is connected primarily with the physical destruction of metallurgical facilities and the stoppage of production. One of the most affected was “Azovstal”, a powerful plant with a full metallurgical cycle in Mariupol, which suffered serious damage and stopped its activities due to hostilities.
In 2023, Ukraine saw some improvement in grain and other commodity exports, especially after the country created its own maritime export corridor in the context of Russia’s withdrawal from the so-called “grain agreement”. This made it possible to resume the export of products that were critically important for the economy of Ukraine. However, this improvement did not last. A few months later, the country faced new challenges in the form of a long-term blockade of the border by Poland. This negatively affected Ukrainian revenues from “import” VAT, as restrictions on transit and trade with neighboring countries made it difficult to access important markets and led to a decrease in customs revenues.
Not all sectors were able to avoid negative consequences. According to the analytical resource “Dou.ua”, for the first time in 2023, the volume of annual IT exports did not increase, but fell by 8.5%. Previously, the share of the IT sector in the total export of services was constantly growing, reaching more than 44% in 2022, and in the total export of Ukraine it was 12.8%. However, according to the latest data, this share has decreased, which indicates the difficult conditions for the IT sector in the conditions of war and economic instability.
Experts suggest a realistic assessment of the current situation, because the war continues, and the caution of customers in choosing service providers from Ukraine is quite understandable. Geopolitical instability and unpredictable conflicts in different parts of the world also add to the uncertainty. The IT sphere is a global industry that is gradually recovering after a period of recession. It is worth reminding that the demand for IT services is currently not as high as it was during the COVID-19 pandemic. For the Ukrainian IT sector, an important signal is not so much the total volume of services, but rather the tendency to revitalization in the market. If global demand picks up, the IT industry will be able to show some positive growth, provided there are no significant domestic shocks. This is an optimistic scenario. However, it can also be pessimistic. At the same time, the most likely option for the development of the IT industry of Ukraine by the end of the current year involves maintaining the volume of export IT services at the level of 2023. Experts believe that this will be a good result given all the challenges and circumstances. It is important to understand that stability in the export of IT services can become an important factor for increasing GDP and for the development of the country’s economy as a whole and its export potential in wartime conditions in particular.
World customers state that Ukrainian specialists continue to work stably and productively even during two and a half years of war. If the approaching winter passes without serious upheavals, the war itself may eventually cease to be an obstacle to placing orders in Ukraine.
