Ukraine’s agricultural sector took a big hit, as capital investment decreased across all economic sectors in 2020.
Capital investment in agriculture, forestry and fisheries in Ukraine decreased by 45.3% in 2020 compared to 2019 — to $13 billion, the Ukrainian Club of Agrarian Business (UCAB) association reported on Facebook on Feb. 26.
Projected low profitability of agricultural production in early 2020, shortfalls in yields for most crops, and uncertainty and restrictions due to the coronavirus pandemic are some of the reasons for the drop in capital investment, according to the UCAB.
It was the second year in a row that capital investment in Ukraine’s agriculture decreased. But while capital investment decreased just by 10% in 2019, it dropped by nearly four times that in 2020, the UCAB reported.
Overall, capital investment in Ukraine’s economy dropped by 38.2% last year, to $15 billion. Investment in Ukraine’s agricultural sector represented 9% of the total share of capital investment.
The association also noted that the last time there was such a significant drop was during the global financial crisis in 2009.
Agriculture remains one of the leaders in attracting capital investment in Ukraine, second only to construction and manufacturing.
According to the UCAB, the overall drop in capital investment in Ukraine indicates a deeper investment crisis in the agricultural sector which may in turn lead to a decrease in the contribution to gross domestic product from the agriculture industry.
Another reason cited for the drop in capital investment in agriculture might be the anticipation of the approaching opening of the land market in Ukraine and a corresponding accumulation of financial resources, the UCAB stated.
After a 19-year moratorium on farmland sales, Ukraine’s parliament voted to lift the ban on March 30, 2020. Lifting the land moratorium was among the primary demands of the International Monetary Fund to approve a $5.5-billion loan program for Ukraine.
The moratorium was one of the biggest obstacles in attracting the necessary investment to increase productivity in the sector. The absence of a land market in Ukraine resulted in the inefficient use of land and an absence of sufficient investment.
Opening up the land market in Ukraine is expected to attract foreign investment and contribute to an average annual nominal GDP growth of 6-7%. Ukrainians will be able to buy land starting in July 2021.
