Ukraine Annual Review 2012: stagnation with one door opened
Growth near zero, reserves falling, a fixed exchange rate defended by rationing — and a small first delivery of gas from the European direction that changed what was possible.
The year in one paragraph
Ukraine grew by almost nothing, co-hosted a football tournament that left useful airports and a construction cliff, defended a fixed exchange rate with falling reserves and administrative rationing, held a parliamentary election, and took the first physical delivery of gas from Europe — the last of which mattered more than all the others.
The four quarters
Q1 — recovery ends as external metal demand weakens.
Q2 — the tournament; infrastructure delivered to an external deadline.
Q3 — contraction, election, currency rationing begins.
Q4 — first reverse-flow gas; year closes at zero growth.
The year's two findings
That deadlines work. The tournament infrastructure was delivered because failure would have been internationally visible on a fixed date. Nothing else in Ukrainian public investment during this period was delivered with the same reliability, and the difference was the deadline rather than the money.
That the energy dependency was breakable. Reverse flow in 2012 was tiny and expensive. It was also proof of concept, and within four years it had replaced the entire import relationship it was an alternative to.
What carried into 2013
A stagnant economy with no domestic growth engine. A fixed exchange rate that the external accounts did not support, defended by rationing. Reserves that had fallen for two consecutive years. No IMF programme. An unsigned association agreement whose signature was scheduled for late 2013. And a decision approaching about which direction the country's trade regime would take.
The commercial reading
2012 is a useful year for anyone who assumes stagnation means nothing is happening.
Headline growth was zero. Underneath it, the airport capacity that would carry the next decade's air connectivity was built, the energy import route that would replace a twenty-year dependency was tested, and the IT export sector grew through the whole flat year without appearing in any commentary about the economy.
Aggregate figures describe the average of an economy. In a year when the average is zero, the interesting question is what was moving in each direction underneath it — and in 2012 the answer determined much of the following decade.
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