Central Europe hammered by Russian food ban

By bne IntelliNews September 15, 2015

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Central and Eastern European countries top the list of the European Union members that are suffering the most because of the trade war between the bloc and Russia, which began after Moscow attacked Ukraine, a report by Moody’s Analytics showed on September 14. Overall, however, the EU managed to grow exports.

Several of the CEE economies relied on Russia as a key buyer of their agricultural products, with exports to the East often constituting a fundamental part of sectors such as dairy in the Baltic states, or fruit and vegetables in Poland. Altogether, before the embargo, around 60% of total food exports from the three Baltic countries was going to Russia, while for Slovakia the share was 25%.

While the EU agricultural sector has compensated for the losses by increasing exports to other destinations and alternative markets, such as South Korea, China, Turkey, Hong Kong, and Egypt, the eastern part of the EU appears to have born much more impact from the embargo. In some instances, such as Lithuania, falling exports prompted the government to revise its projection of economic growth for 2015.

Exports from Slovakia, Slovenia, Hungary, and the Baltic states fell the most y/y between August 2014 and April. Slovakia exports fell about 17% y/y during that time.

Broken down by sector, some of the eastern EU member states were hit particularly hard. Dairy exports fell around 40% in Latvia and Estonia between August last year and April, with the Lithuanian and Polish dairy exporters having to shoulder a drop of 26% and 19%, respectively. 

In Lithuania, exports of fruit and vegetables dwindled 42%, while in Poland they fell 25%. Exports from the meat sector fell 25% in Latvia.

Overall, from August 2014 to April 2015, EU agricultural exports to Russia decreased by 42% y/y, from €8.6 billion to €5 billion, according to the European Commission’s Directorate General for Agriculture and Rural Development. The Russian ban, as well as accompanying EU support for sectors such as dairy and fruit and vegetables, are set to continue for at least six more months, Moody’s Analytics notes.

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