Showing posts with label Crimean economy. Show all posts
Showing posts with label Crimean economy. Show all posts

Saturday, July 19, 2014

19/7/2014: Some Early Signs of Crimean Economy Suffering Sustained Slowdown



A very interesting data coming out of Crimea - early indicators of the cost of Crimea's incorporation into Russia: http://www.infox.sg/others/frame/krym-prishel-v-upadok/

Roughly translating some parts of the article:

Tourism is suffering in Crimea - the sector is the cornerstone of the regional economy, but over the first 6 months of 2014, number of visitors to Crimea fell ca 29.5% y/y at 1,772,000 visitors as opposed to the same period of 2013 when Crimea received 2,515,000 visitors. The issue, of course, is not solely down to Crimea's accession to Russia - given the state of civil war in Ukraine and the collapse of the country economy, there can be expected a massive reduction in the number of travellers to all parts of Ukraine. Given recessionary dynamics in Russia, there also can be expected to be fewer tourists visiting all Black Sea resorts over this summer.

According to Ukrainian estimates, overall number of Ukrainians travelling to the Black Sea resorts (including those in Ukraine proper) is projected to fall by some 30% this year due to deepening economic crisis and falling real incomes.


The collapse of tourism to Crimea is probably a temporary phenomena. And much of it is due to disruptions in transport routes. For example, ferry crossings from Russian mainland rose 2.8 times, air traffic rose 1.6 times. However rail transport numbers fell 2.8 times. Rail goes via Ukrainian mainland, so this is not surprising. There is no land connection to Crimea from Russia and ferry and airlines capacities are very limited, although they will be expanded over time. The bridge, linking Crimea to Russian mainland will likely take 2 years to build and estimated costs range from USD2 to 4 billion.

As the result, at the start of the tourism season, Crimea's resorts reported 63% vacancy rates.

In the past, roughly two thirds of visitors to Crimea were Ukrainian nationals, with one third being Russian nationals. While the former are understandably cancelling their plans to vacation in Crimea, the latter are finding it difficult to get to the resorts: majority of Russian visitors in the past opted to travel either by car or by rail - both of these routes are now firmly blocked. Meanwhile, airports in Crimea are too small to accommodate significant numbers of visitors and their capacity is now already stretched to the limit. Two major carriers Transaero and Dobrolet are reporting 100% and 98-99% loads on their flights.

While much of this suggests that the problems with tourism sector are temporary, there are some worrying parallels across all sectors of Crimean economy. Apparently, lack of compliance with certification relating to EU requirement that any exports from Crimea can be accepted only if they bear certification from Ukraine, is reducing industrial output in Crimea. And European sanctions that ban exports from Crimea are hitting the sector hard. In the past, EU accounted for over 35% of total exports from Crimea. Now this is down to USD5.9 million and accounts for just 10.2% of total exports. Largest shares of exports to EU go to Germany (4.5%) and Hungary (2.1%), while Austria, France, Poland, the Netherlands and Lithuania accounted, jointly for 3.6%. Exports were heavily concentrated in industrial machinery, chemicals and agricultural goods. Meanwhile, shipments to Russia are rising, but slower than the decline is exports to EU.

Overall, the problems in tourism sector appear to be much more significant than in the industrial and agricultural sectors but these problems appear to be linked to:

  1. Temporary transport links problems;
  2. Decline in travel in Ukraine and Russia due to the economic slowdown; and
  3. Much more longer term issue of Ukrainian tourists switching away from Crimea.