According to the NBU, in 2022 Ukraine had a positive balance of current operations in the balance of payments with a record figure for the last 10 years — $8.6 billion. Usually, Ukraine had a deficit on the current account and had to resort to borrowings. Let us take a look at some reasons for those changes (of course, relating to the war, huge losses and international support for Ukraine).
A significant deficit in trade in goods is within "normal" indicators. The goods-trade deficit in 2022 is almost the same as in the pre-coronavirus year of 2019 ($14.6 billion and $14.3 billion, respectively) and much smaller than the deficits of 2012 and 2013 ($21.8 billion and $22.1 billion), including as a result of excessive energy imports from a "brother" neighbour (that came to Ukraine with a war in 2014).
The fall in the export of goods by more than a third in 2022 compared to fairly successful 2021, despite the destruction of production facilities and blockade of maritime traffic, is also not extraordinary, and in terms of volume and structure largely correlates with the indicators of 2015-2016 (the active phase of the first wave of aggression).
But then, there appeared "peculiarities", mainly caused by war (losses in trade in services) and international support (grants and partner assistance from international organisations and democratic countries). The question is how important and challenging they are for our account of current operations.
First of all, note that in the previous years, a part of the deficit in trade in goods was covered by a traditional surplus in trade in services. In 2022 (due to hostile actions) the domestic service system collapsed, trade in services was destroyed, and only thanks to partners (imports of services increased from $14.4 billion to $25.3 billion) Ukraine stayed in the world system of trade in services, albeit with a deficit of $9.1 billion. Therefore, in 2022 the deficit of trade in goods and services reached record-high $23.8 billion (or 16% of the estimated GDP).
However, trade in services has a feature that may serve as an important guide for further transformational processes. The only branch that not did not worsen export indicators but improved them was the export of information and communication services (ICS) (in the NBU classification, "telecommunication, computer and information services"). While the total export of services equalled $16.2 billion, ICS export exceeded $7.5 billion – a bit less than half of the total in 2022 (and 5% more than in the successful year of 2021).
Such results prove once again that ICS have a strong base and prospects in Ukraine, and are properly integrated in the global information networks. With due attention, they may soon become a Ukrainian brand.
But there is a danger here – because the tax authorities will also notice it. The practice of taxing things that function and bring good results (including financial), unfortunately, remains invariable in our country. So, it would be appropriate to impose a moratorium on tax increases (in any form) for the ICS sector.
Similar risks go with a desire to manage import flows with import substitution, obligatory use of domestic components, etc. It is worth notice that Ukraine now enjoys a number of "visa-free" regimes (energy, economic, customs, transport), which made Europe more open to domestic businesses and let us participate in trans-European projects. Inappropriate import restrictions will simply run contrary to our free access to European markets.
Another feature of Ukraine’s payments balance in 2022 is that despite the huge foreign trade (goods and services) deficit, the balance of the current accounts bears a large surplus – as indicated, $8.6 billion, thanks to the inflow of so-called primary (salaries paid by foreign employers – $9 billion) and secondary (partners’ assistance – $23.4 billion) revenues. These two items of the balance of payments witness the respect for Ukraine on the part of the international community.
So far, unfortunately, there is no certainty that such large-scale support will continue in 2023. However, it may probably be assumed that decisive rational and balanced steps of Ukraine, both on the battlefield and in the field of economic reconstruction, will always be supported by the democratic community.
https://razumkov.org.ua/komentari/transformatsii-u-balansi-potochnykh-operatsii
