Ukraine. Growth limits of agriculture share in GDP

24.01.2018

Speaking at the meeting with young entrepreneurs on January 10 in Kiev, the Prime Minister Groisman said that agricultural sector formed 17-18% of Ukraine's GDP. The Prime Minister also stressed the great potential of its technological development.

The above data shows that agriculture share in Ukraine's GDP returned to the level of 2000 at 17.1% (source: World Bank). Then the share decreased reaching its low in 2007 - 7.5%.

After the 2008 crisis, the role of agriculture sector in GDP recovered. This trend was accompanied by an increase in its exports.

The diagram 1 clearly shows the growth of agricultural and food products share in exports in 2012-2017 from 13.4 to 21.1% and from 12.9 to 20.3%, respectively.

At the same time, relative weight of chemical products and related industries declined (from 7% to 3.8%), ferrous metals (from 22.6% to 19.7%) and ferrous metal products (from 4.1% to 2%).

During 2012-2016, export share of mineral products decreased from 11% to 7.5%, but over 10 months of 2017 recovered to 9.4%.

From the triad of products that generated the country's main currency earnings over the last 20 years - metal, chemistry, agricultural products - the latter is becoming a leader.

In this context, we should note an alarming increase in exports share of raw materials (agricultural and mineral raw materials). It increased from 24.4% in 2012 to 30.5% in 2017 in total volume of commodity exports.

The tendency of raw orientation and deindustrialization gains footing. The high share of agricultural sector in GDP and exports shows a confident drift towards winding up of multi-commodity economic model with production of goods with high added value. Within the agricultural sector itself, relative monoculture is maintained, when the main bulk of commodities and revenues are provided by several products.

The decline in share of highly profitable industrial/processing sectors will help lowering budget revenues and reduce potential for budget support of agricultural production. In these conditions, formation of a "give-and-take" production model is likely in the agriculture sector of Ukraine.

In the developed economies, the share of agriculture in GDP ranges from tenths of a percentage point to 2-5%. For comparison, we will quote this share for Ukraine and our neighbors in 2010-2016 (see the table).

In some exceptional cases, agriculture is not involved in GDP at all, such as in Singapore. According to the website, in 2016 its share was 0%.

The contrast is made by countries with the highest share of agriculture in GDP. So, according to the same website, they are: Sierra Lyons - 61.4%, Somalia - 60.2% (2013), Niger and Guinea-Bissau - 44.7%, Mali - 40.7%. These countries show in their practice a specific limit of agriculture share in national economy.

With respect to Ukraine, the limit of such share is determined by the resource potential, model of economic development, quality of management and effectiveness of reforms for economic development.

 

UkrAgroConsult

 

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