Ukraine’s economy two years on from the full-scale invasion
Parviainen, Sinikka (12.04.2024)
Numero
3/2024Julkaisija
Bank of Finland
2024
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2024041216868Tiivistelmä
This brief assesses the state of the Ukrainian economy two years since Russia’s full-scale invasion. After a devastating 2022, Ukraine’s economy in 2023 proved surprisingly resilient, thanks in part to its foreign partners. Decelerating inflation and a managed exchange rate provided macroeconomic stability, while re-secured shipping routes in the Black Sea improved Ukraine’s export performance. Despite these achievements, the problems of 2022 began to re-emerge in 2024 in Ukraine’s fight for survival. Besides the drying up of foreign funding and armaments supplies and the widening mismatch in labor force allocation, Ukraine requires more long-term, non-repayable assistance, greater support for returning Ukrainians, and reduced state pressure on private businesses.
Julkaisuhuomautus
Abstract...3
1. Introduction...4
2. Macroeconomic and financial situation...4
2.1 Higher-than-expected economic growth for 2023...4
2.2 Inflation down to target levels...5
2.3 Hefty reserves help in hryvnia’s shift to a managed flexible rate...6
2.4. Banking sector stable even with some banks needing recapitalization...8
2.5. State finances shaped by war and maintained by foreign financing...9
3. Ukraine’s external position...12
3.1. Widening current account deficit...12
3.2. Exports contract for second year despite bumper harvest and re-established sea routes...12
4. Industrial and sectoral development...14
4.1 Industrial production volumes set back decades...14
4.1.1 Devastated steel sector resuscitated by military demand and opening of export routes...15
4.2 All-important agricultural sector takes on even larger role...16
4.3 Energy infrastructure functional, but in need of reform...17
4.4 State-owned enterprises taking an even larger role and private business struggling under excessive state pressure...18
4.5 Western regions benefit from relocation of economic activity...18
5. Consumer sectors and the labor market...20
5.1 Retail trade on the mend as incomes recover...20
5.2 Simultaneous problems of high unemployment and shortage of workers...21
5.3 Poor demographics made worse...22
6. Outlook increasingly uncertain...23
6.1 Decelerating growth and mounting reconstruction needs...23
6.2 Foreign support comes increasingly in the form of loans...24
7. Concluding remarks...26
References...28
1. Introduction...4
2. Macroeconomic and financial situation...4
2.1 Higher-than-expected economic growth for 2023...4
2.2 Inflation down to target levels...5
2.3 Hefty reserves help in hryvnia’s shift to a managed flexible rate...6
2.4. Banking sector stable even with some banks needing recapitalization...8
2.5. State finances shaped by war and maintained by foreign financing...9
3. Ukraine’s external position...12
3.1. Widening current account deficit...12
3.2. Exports contract for second year despite bumper harvest and re-established sea routes...12
4. Industrial and sectoral development...14
4.1 Industrial production volumes set back decades...14
4.1.1 Devastated steel sector resuscitated by military demand and opening of export routes...15
4.2 All-important agricultural sector takes on even larger role...16
4.3 Energy infrastructure functional, but in need of reform...17
4.4 State-owned enterprises taking an even larger role and private business struggling under excessive state pressure...18
4.5 Western regions benefit from relocation of economic activity...18
5. Consumer sectors and the labor market...20
5.1 Retail trade on the mend as incomes recover...20
5.2 Simultaneous problems of high unemployment and shortage of workers...21
5.3 Poor demographics made worse...22
6. Outlook increasingly uncertain...23
6.1 Decelerating growth and mounting reconstruction needs...23
6.2 Foreign support comes increasingly in the form of loans...24
7. Concluding remarks...26
References...28