Bad for Ukraine, but for Russia, no bottom in sight.
In 2014, only 4.6 million Ukrainians traveled to Russia — less than two-thirds as many as to Poland.
Last year’s statistics are not in yet, but another drop in travel to Russia is highly likely, because Moscow has been tightening regulations to make it harder for Ukrainian migrant workers to stay indefinitely and because, as of last summer, there are no more direct flights between the two countries. Besides, starting in mid-2016, Ukrainians will be able to travel visa-free to the European Union, which will likely make travel to Europe vastly more popular.
As for bilateral trade, it has plummeted. Though both Russia and Ukraine have suffered declines in international trade because of sharply devalued currencies (the ruble has lost 20 percent of its value against the U.S. dollar last year, and the hryvnia lost 34 percent), the decline in exports and imports between the two countries has been more pronounced than with the rest of the world. For example, Ukraine’s exports to Russia stood at 44 percent of the 2014 level in the first 10 months of last year, while total exports were at 67 percent.
Ukrainian businesses have fought to maintain sales to Russia, using a free economic zone in Crimea that the two countries quietly maintained as a window for cheap Ukrainian food. In the fall of 2015, though, Crimean Tatar and right-wing Ukrainian activists cut off the traffic, and Kiev decided against interfering. On the import side, Russian natural gas supplies have shrunk because much of Ukraine’s energy-intensive industry is in the war-torn east, the winter has been mild and the government has managed to secure alternative supplies from Europe. . . .
Russia’s GDP will go down by 3.8 percent this year, according to the Bloomberg consensus forecast, and the Kremlin’s ham-handed response to Ukraine-related ostracism is probably as much to blame for this as cheap oil. It has hastened the end of the consumption-driven growth model that sustained Russia through the last decade.
Ukraine, for its part, has lost about 3 million residents compared with 2013, despite one of the worst natural population growth rates in the world. The Crimea annexation is mainly to blame. Ukraine also saw a 20 percent decline in industrial production, largely because the factories in the east stopped working.
This, of course, is a disaster for a country that was poor to start with and that is now the poorest in Europe. Yet there is one good reason to believe the steep fall has bottomed out: Russia has no appetite for further military adventures in Ukraine. Recent month-on-month indicators show a cautious rebound is already under way. Though this year, the Bloomberg consensus forecast is for a 10.7 percent economic decline, economists believe Ukraine will grow 1.4 percent next year. For Russia, a 0.2 percent decline is forecast.
