A world of advance settles in kyiv all this week, a year after the beginning of the Russian invasion in Ukraine. Today, we are interested in the state of the country’s economy, which is holding up quite well, even if the past year has of course been very difficult.
The year 2022 will obviously remain as the most difficult in the history of the young Ukrainian democracy with between 30 and 35% decline in Gross Domestic Product (GDP). This is the largest drop since independence 30 years ago. The cost of the destruction caused by the bombardments is estimated at more than ten billion dollars.
>> War in Ukraine: follow our live
Power cuts, due to Russian strikes on energy infrastructure, have slowed the economy. The war in Donbass deprived the country of a good part of its mining and steel resources. Agricultural land which represents 20% of the national wealth has also been affected. The ports are in trouble, when they have not been taken by the Russian army, on the Sea of Azov. Two revealing figures: steel exports fell by 67% in 2022, those of wheat by 22%.
The high-tech sector supports the Ukrainian economy
Obviously, the economy is suffering, particularly in the east and south of the country. But the rebound is underway with a strong ability to adapt. This goes through high tech, which now supports the Ukrainian economy. A spectacular phenomenon. These companies have all relocated (by the hundreds) to the west of the country between kyiv and Lviv. They show amazing creativity. The sector now employs more than 300,000 people, which is more than the civil service. It accounts for almost half of the wealth in the service sector. And seven of the twenty richest entrepreneurs are today part of this world of technology and digital.
This vitality serves the army – which often uses the discoveries of computer geniuses – and it is also reflected in the daily life of civilians. For example, in Kiev you will find digital terminals in public areas where you can do everything: withdraw money, surf the Internet, shop online, credit your phone or book your transport.
A return to growth in 2023?
More traditional sectors also rebounded. For example, the banks held. Same thing for the powerful agribusiness after a finally correct harvest. He adapted to find means of transport to export his cereals (a little less by sea, a little more by road or train). Let’s not forget that the West Country works. kyiv in particular which represents a quarter of the production of wealth. Result: 80% of businesses continue to operate. Ukraine even hopes to return to modest growth this year with +0.3%.
The economy is also holding up thanks to Western aid. It is an economy on life support, carried at arm’s length by Europe and the United States. More than 25 billion euros over two years have been provided by the Europeans, it’s colossal, and 12 billion by the United States. This takes the form of loans, grants, and also equipment, for example hundreds of thousands of electric generators.
The challenge of the current period concerns the transformation of the Ukrainian economy, with a tax system which makes it possible to improve the resources of the State and with more transparent rules, in particular to reduce corruption which is still very present in the middle of the middle companies. It is also the fight against the privileges of the former oligarchs, whose de facto fortune has greatly diminished. We think in particular of the most famous of them, Rinat Akhmetov, and of all those billionaires nicknamed “the Monaco battalion” by the Ukrainian secret services.