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Allowing Ukrainians to survive the winter. This is the priority of the international conference “Resilience and reconstruction”, organized this Tuesday, December 13 in Paris. Because the Ukrainian economy, in survival mode since the beginning of the war, is now more than ever threatened by Russian bombs.
The new Russian military strategy is to massively destroy all vital infrastructure to demoralize the population and block the country. Electrical networks, water pipes, heating, supply routes, are the new targets of the Russian army. Whenever one of these facilities is damaged, Ukrainians are keen to repair it as quickly as possible. As on the battlefield, they show great resilience. It is still necessary to have the technical means. Ukraine, for example, is sorely lacking in electrical equipment, such as transformers or generators, explains the Minister of the Economy, present today in Paris. And of course it takes money, a lot of money, to finance these repairs as the collapse of Ukraine’s GDP deepens due to these new Russian attacks. It should decline this year by 40%.
This record contraction of the economy has resulted in the brutal impoverishment of Ukrainians.
Extreme poverty was rare before the war, it concerned 2.5% of households. Today is ten times. A quarter of the population is affected, it could be half by 2023. Inflation above 25% penalizes households and businesses. And with a cost of money at 25%, borrowing becomes unaffordable. Especially for the state. International aid is essential to plug the public deficit. Not to mention the military expenditure which absorbs 43% of the state budget.
Prior to the shelling of civilian facilities, Ukraine’s economy had been quite resilient.
Eight out of ten Ukrainian companies were in business this fall, producing half as much as before the war. Some have relocated to the spared regions of central Ukraine. Three of them have seen their income increase by 8% since the beginning of the conflict. And despite the war and the bombs, the trains run. The port of Odessa continues to operate. The agility of Ukrainian companies is very real, but it is often overtaken by events. An example with electricity production. With the connection to the European electricity network, the Ukrainians hoped to export electricity to the west from next year, they expected an income of more than one billion euros, but it seems more likely today that they will become net importers in the coming months.
In concrete terms, how can the private companies and international institutions that are meeting in Paris today intervene in favor of Ukraine?
In this uncertain environment, foreign companies still believe in Ukraine’s future potential. Nestlé, the Swiss agri-food giant, yesterday announced an investment of 40 million euros to build a factory in the west of the country, with 1,500 jobs at stake. We will see this afternoon if the 500 French companies expected already have concrete projects in prospect. On the side of the institutions, whether at the level of Europe or the French State, the urgency is financial support. So far, the Europeans have been less generous than the Americans, partly because the decision-making process is more complex and slower in Brussels than in Washington. However, Ukraine especially needs the money to arrive in its coffers as quickly as possible. Ukraine has already received 85 billion euros from the West. It’s huge and little at the same time. This represents 15% of the aid deployed by the 27 for anti-inflation shields. kyiv estimates that it needs 55 billion euros today.