On the eve of the first anniversary of the war launched by Russia against Ukraine, a spotlight on the state of the Ukrainian economy.
Before the war, Ukraine was already the poorest country in Europe in terms of gross domestic product (GDP) per capita, with an economy that was barely recovering from the 2014 war and then from Covid-19. Since February 24, 2022, its GDP has shrunk by a third. A descent into hell disproportionate to the collateral damage suffered by those who suffer today from the energy crisis and food inflation caused by this war.
Some concrete information to recall the extent of the damage: one out of two power stations was damaged by targeted attacks. Half of the capacity of the steel industry, which provided Ukraine with its main export income, has been destroyed. As the main refinery in the country or fuel tanks. Not to mention entire towns totally razed like that of Mariupol where all the dwellings have been reduced to dust.
Yet the Ukrainian economy continues to function
This was underlined with satisfaction by the director of the International Monetary Fund (IMF) on her return from kyiv. Kristalina Georgevia especially praised the resilience of the institutions, but also of the men and women who run this economy plunged into the chaos of war. The state is still able to levy the tax. The Central Bank is maneuvering to stem inflation, which peaked at 25%. Ordinary citizens continue to work. As farmers continue to cultivate as much as they can, produce for the population or for export, cereals being one of the great riches of the country. And then, without waiting for the end of the conflict, the Ukrainians are tirelessly and quickly rebuilding the infrastructure essential to their survival.
How long will the Ukrainian economy be able to survive the war?
According to IMF experts, the rebound will occur this year, whether the war ends or not. Because if a good part of the productive apparatus has been wiped out, there are also sectors such as digital which have escaped the military assaults. The Forbes ranking of the wealthiest indicates that the wealth of the twenty richest Ukrainians in the country has shrunk by half. It is always the same oligarch, Rinat Akmetov, who dominates this ranking.
But many others have disappeared from the radar. Like those who were very present in the heavy industry installed in the east of the country. On the other hand, seven tech entrepreneurs appear for the first time among the first twenty fortunes of the country. It is therefore a more modern, more advanced economy that could emerge from the rubble.
The fund’s cautious optimism is conditional on continued US and European support.
Indispensable help. In 2022, it amounted to 113 billion dollars, including military aid. This represents half of Ukraine’s 2021 GDP. This year, the Ukrainian state must find 38 billion dollars to fill the public deficit. The IMF, alongside the European Union and the United States, will participate in this exceptional financing. Without this constant infusion, the Ukrainian economy would probably come to a standstill, despite the spontaneous generosity of the population to support the war effort. Online jackpots, corporate donations, pennies taken at the pump and ten thousand other initiatives irrigate this immense surge of solidarity. There is no quantified assessment of these resources drawn from the bottom of the pockets of the Ukrainians, the amounts are calculated in hundreds of millions of dollars.