Ukraine Market Report — Q2 2023
Growth continuing from a low base, inflation falling rapidly, and an export corridor whose continuation was uncertain from one renewal to the next.
Overview
Growth continued from the low 2022 base. Inflation fell rapidly as the previous year's shocks passed out of the comparison.
The grain corridor operated under successive short renewals, each negotiated separately.
Operating on a renewable arrangement
The corridor's structure created a specific commercial problem: an export route that might or might not exist beyond the next renewal date.
A trader cannot write a forward contract against a route with an uncertain expiry. A shipper cannot commit vessels. A farmer cannot plan a planting decision on export access that may lapse before the harvest.
The practical response was to keep the alternative routes running in parallel even when they were more expensive per tonne, because the option value of a functioning alternative exceeded its excess cost.
That is an important general point about redundancy. The correct question is not whether the alternative route is cheaper — it will not be. It is whether the cost of maintaining it is less than the cost of losing access with no alternative in place, and in this period the answer was unambiguous.
Disinflation
Inflation fell sharply through the quarter. The mechanics were straightforward: the 2022 currency adjustment and energy shocks had passed through, demand was weak, and the central bank had tightened.
For a business, falling inflation restored some ability to write contracts in local currency and to plan on a horizon longer than one quarter.
Macro position
Growth from a low base. Inflation falling. Exchange rate fixed. External financing on a four-year framework.
Sectors
Agriculture — a harvest approaching with uncertain export access.
IT services — growing.
Construction — reconstruction work expanding.
Energy — repair and reinforcement ahead of the next winter.
What the quarter settled
That the cost of maintaining redundant logistics capacity is best understood as an insurance premium rather than as an inefficiency — and that this was about to be tested directly.
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