Ukraine Annual Review 2013: the year the model ran out
Three consecutive years of falling reserves, a fixed exchange rate the external accounts did not support, an industrial base in structural decline, and a trade decision suspended in November. Everything the following year contained was already assembled.
The year in one paragraph
Ukraine's industrial base contracted for a second year, its agricultural sector produced one of its largest harvests, its reserves fell for a third consecutive year while the exchange rate was held fixed by rationing, and in November the government suspended preparations to sign the association agreement with the EU — after which the country's direction became an open question for the first time since 2004.
The four quarters
Q1 — industrial contraction; reserves falling; no programme financing.
Q2 — the two economies diverging; strong agricultural prospects against contracting industry.
Q3 — very large harvest; business planning suspended pending the November decision.
Q4 — signature suspended, protests begin, bilateral financing agreed in December.
The structural position
Stated without reference to the politics, Ukraine at the end of 2013 had:
A heavy industrial sector that was uncompetitive at prevailing global prices and energy costs, and declining structurally rather than cyclically.
An agricultural and food sector that was globally competitive and growing.
An IT services export sector growing every year regardless of macroeconomic conditions.
A fixed exchange rate that the balance of payments did not support, maintained by administrative rationing and declining reserves.
No external programme financing, because the conditions attached to one had been politically unacceptable for three years.
That combination determines everything that follows, and it was in the published data.
What carried into 2014
All of the above, plus an unresolved political situation, plus a bilateral financing arrangement that was contingent and only partly disbursed, plus the largest external repayment schedule the country had faced in years.
The commercial reading
2013 is the archive's clearest case of an economy where the aggregate figure was the least informative number available.
Headline growth was approximately zero. That single figure combined an industrial sector in structural decline with an agricultural sector having one of its best years and a services export sector compounding at a high rate.
A company that read the aggregate saw stagnation and stayed away. A company that separated the components saw two sectors worth entering and one worth avoiding — and that reading was available from published data, at the time, with no special access.
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