The effects of the war on the Ukraine economy: The situation at the end of 2022
Heinonen, Lauri; Korhonen, Iikka (20.01.2023)
Numero
1/2023Julkaisija
Bank of Finland
2023
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe202301204994Tiivistelmä
This brief presents an overview of Ukraine’s economy before and during the first ten months of the Russo-Ukraine war, as well as some preliminary considerations for the post-war economy. Although Ukraine’s economic growth trailed many of its peers in the years leading up the invasion, the country possesses certain economic and institutional strengths over most countries at a similar level of development. While these strengths should make reconstruction less difficult, the situation remains fraught with difficulties. Many of the activities that make the largest economic contributions, particularly to exports, take place in the eastern regions of Ukraine or in the Kyiv capital region. These areas have either been temporarily occupied by Russia or face a greater military threat by Russia than the poorer, more peaceful, western parts of the country. The country’s public finances are deeply in deficit, so restoring strong export revenues is critical to Ukraine’s economic recovery. As long as the war continues, Ukraine’s public finances and military efforts must largely be financed by foreign partners.
Sisällysluettelo
Abstract 4
1. Introduction 5
2. Overview of the economic situation in Ukraine before the war 6
2.1. Ukraine’s economic structure 6
2.1.1. Industry and agriculture 8
2.1.2. Foreign trade and trade routes 11
2.1.3. Current account 18
2.2. Structure of the economy at regional level 21
2.2.1. GDP and industry of regions 21
2.2.2. Foreign trade of regions 23
2.2.3. Regional agriculture 24
3. Standard of living and social development in Ukraine 26
3.1. Overview at national level 26
3.1.1. Economic indicators of well-being 26
3.1.2. Corruption and informal economy 27
3.1.3. Access to banking and remittances 29
3.2. Overview of regional living conditions 31
3.2.1. Rural development and its issues 31
3.2.2. Regional economic and human development indicators 33
3.2.3 Population development in regions 35
4. Effects of the war on Ukraine’s economy 36
4.1. Overview of the economic losses between 2014–2022 36
4.1.1. Reduction in dependency on Russia: Russian investment and foreign trade 36
4.1.2. Reduction of dependency on Russia: Western integration and energy 38
4.1.3. Fiscal and financial resilience prior to 2022 39
4.2. War and production 40
4.2.1. Overview 40
4.2.2. Industry and services 41
4.2.3. Agriculture 42
4.3. War and international trade 42
4.3.1. Effects on exports 42
4.3.2. Effects on imports 43
4.4. War and public finances 45
4.4.1. Effect on fiscal expenditure 45
4.4.2 Effect on tax and other revenue 48
4.5. Damage to infrastructure and the cost of rebuilding 51
4.5.1. Estimates of damage 51
4.5.2. Timetable, costs and institutions for reconstruction 53
5. Conclusions 55
References 56
Data for analyses in the text (excluding figures and tables) 61
Appendix 1. Graphs 63
1. Introduction 5
2. Overview of the economic situation in Ukraine before the war 6
2.1. Ukraine’s economic structure 6
2.1.1. Industry and agriculture 8
2.1.2. Foreign trade and trade routes 11
2.1.3. Current account 18
2.2. Structure of the economy at regional level 21
2.2.1. GDP and industry of regions 21
2.2.2. Foreign trade of regions 23
2.2.3. Regional agriculture 24
3. Standard of living and social development in Ukraine 26
3.1. Overview at national level 26
3.1.1. Economic indicators of well-being 26
3.1.2. Corruption and informal economy 27
3.1.3. Access to banking and remittances 29
3.2. Overview of regional living conditions 31
3.2.1. Rural development and its issues 31
3.2.2. Regional economic and human development indicators 33
3.2.3 Population development in regions 35
4. Effects of the war on Ukraine’s economy 36
4.1. Overview of the economic losses between 2014–2022 36
4.1.1. Reduction in dependency on Russia: Russian investment and foreign trade 36
4.1.2. Reduction of dependency on Russia: Western integration and energy 38
4.1.3. Fiscal and financial resilience prior to 2022 39
4.2. War and production 40
4.2.1. Overview 40
4.2.2. Industry and services 41
4.2.3. Agriculture 42
4.3. War and international trade 42
4.3.1. Effects on exports 42
4.3.2. Effects on imports 43
4.4. War and public finances 45
4.4.1. Effect on fiscal expenditure 45
4.4.2 Effect on tax and other revenue 48
4.5. Damage to infrastructure and the cost of rebuilding 51
4.5.1. Estimates of damage 51
4.5.2. Timetable, costs and institutions for reconstruction 53
5. Conclusions 55
References 56
Data for analyses in the text (excluding figures and tables) 61
Appendix 1. Graphs 63