Ukraine has so far been spared from a major coronavirus outbreak. The country’s economy, however, is far less quarantined from the disease’s global impact.
The new coronavirus originated in Wuhan, China has sparked economic uncertainty around the world. Markets are in turmoil, in part because of mounting fears of a global recession, and that’s particularly bad news for Ukraine’s economy, still recovering from the body blow of Russia’s 2014 invasions of Crimea and Donbas and in desperate need of foreign loans to float government spending through an acute revenue shortfall.
Moreover, China overtook Russia as Ukraine’s top trading partner last year, leaving Ukraine’s economy particularly exposed.
Speaking to Ukraine’s parliament Friday, Ukrainian President Volodymyr Zelensky said Ukraine’s economy was “accelerating, but then stumbled and risks falling face down on the ground.” “The industrial glory of Ukraine is gradually becoming a matter of the past,” Zelenskyy said.
So far this year, Ukraine’s government revenue has fallen far short of expectations. In January, that number was 25% lower than what was projected when lawmakers crafted the nation’s 2020 budget. In February, revenue was 5% less than expected.
Altogether, government coffers are currently short about $642 million in revenue
Meanwhile, foreign loans are harder to come by as the economic aftershocks of the coronavirus outbreak ripple across the globe. That leaves Kyiv short of cash and with fewer available loan sources. And, according to the International Monetary Fund, the global economic picture may not improve anytime soon.
In fact, the global economic dip already is being felt in Ukraine. Following months of slow but sustained growth, Ukraine’s gross domestic product dropped by 0.5% in January, according to government data. And for the first time in a year, Ukraine’s Finance Ministry will cancel its weekly government bond auction, which was scheduled for Tuesday.
So far in Kyiv, there hasn’t been a run on supplies at supermarkets, and it’s still relatively rare to see people on the streets wearing face masks. A parade Sunday for International Women’s Day went ahead as scheduled.
Some say that Ukraine’s economy also is sufficiently quarantined to whether China’s economic downturn without permanent damage. The future of the Sino-Ukrainian trade relationship is not yet in jeopardy, “Ukraine is not so integrated into China’s production cycles. We mainly import finished products. Therefore, some Chinese-dependent businesses will feel the negative consequences, but it won’t be catastrophic for the Ukrainian economy,” MP Oleksiy Honcharenko said.
Taras Kuzio, a political science professor at the National University of Kyiv-Mohyla Academy, said Ukraine was not likely to rethink its economic ties to China. Rather, he said the coronavirus scare likely would be nothing more than a “minor blip” in the Ukraine-China economic relationship.
The bottom line, Kuzio said, is that the Russian military threat to Ukraine trumps all other concerns including the coronavirus.
“In the former USSR, especially in Ukraine, China is a strategically important alternative to Russia,” Kuzio said. “The direction of change in the orientation of Ukrainian exports from Russia to China and the EU will, I believe, continue to retain its momentum, excepting minor blips.”
About 15% of Ukraine’s imports are from China, comprising mostly cheap, finished consumer goods and industrial equipment, experts say. Also, China accounts for more than 7% of Ukraine’s exports mainly agricultural products and ores.
Ukraine has replaced the U.S. as China’s top supplier of corn. And China is now the top purchaser of Ukrainian military arms, according to data from the Stockholm International Peace Research Institute.
Over the past five years, Beijing has ramped up its investments in Ukraine to prepare the nation’s transportation infrastructure for its role as a portal into Europe for China’s proposed One Belt, One Road overland trade route across Asia.
Beijing ultimately wants Ukraine to become a stable, reliable partner through which Chinese goods can flow into Europe.