Ukraine’s economy is stabilizing after the shock of the war – #Ukraines #economy #stabilizing #shock #war
KYIV, February 27 (Reuters) – Russia when Ukraine was invaded a year ago, the Novus supermarket chain in Kiev quickly emptied its shelves as local and overseas supply chains collapsed. Fresh produce became scarce and panic buying became widespread.
Oleksiy Panasenko, deputy general director of operations at the popular outlet, remembers how the business was back before Novus, like many other large retail chains.
“On the second day (of the war), fighting was already taking place on the outskirts of Kiev,” he told Reuters. “In February and March, our shops became more than a place to buy food: they were places to meet, to socialize, so-called islands of stability.”
And in the spring Ukraine troops Russia when he forced his army back from the capital, the retail sector and the wider economy revived.
10More than 00 foreign and Ukraine which consolidates its business of Ukraine Europe Data from the Business Association showed that by the end of May, 47% of their members had fully resumed operations, while another 50% were working with some restrictions.
But then, in October, the missile attacks began, delivering a hammer blow to Ukraine. Russia battered power grids and substations across the country, causing outages in the freezing winter and hitting heavy industry hard.
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The economy shrank by a third last year, which of Ukraine It is the biggest drop since independence from the Soviet Union in 1991. Annual economic productivity before the invasion of Russia 200 billion exceeded the dollar.
The challenges are overwhelming as the war enters its second year with no signs of slowing down. Reuters polled seven economists whose forecasts for 2023 ranged from a significant but less dramatic decline in gross domestic product (GDP) of 5% to a modest expansion.
Access to reliable energy will be a major obstacle. Economists, two government officials and the heads of two private companies say that while many businesses are finding ways to cope with the war, those that cannot run on generators alone will struggle this year.
of Ukraine ArcelorMittal Kryvyi Roh, its biggest steelmaker, said its output was about 25% of pre-war levels amid power cuts.
“We see that small and medium-sized businesses are adapting to energy shortages fairly quickly by purchasing generators, batteries and other equipment, while damage to infrastructure remains moderate,” said Olena Bilan, chief economist at Dragon Capital investment house, whose forecast was the most negative. among the economists surveyed.
“If this situation continues, the decline in GDP in 2023 will not be as significant as we expect. But our forecast also assumes the end of the hot phase of the war at the end of the third quarter of 2023,” Bilan said. He did not explain why Dragon expected the war to cool down.
Ukraine The Central Bank predicts that the GDP will grow by 0.3% this year, and the Ministry of Economy predicts that it will grow by 3.2%.
BIG PAYOUT
Until last summer, Ukrainian officials, esp UNAfter the grain export agreement mediated by
The agreement included Ukraine’s exports, which before the war accounted for about 12% of GDP and about 40% of total exports. village saved his farm.
According to mid-February, Ukraine’s grain exports for the July-June 2022-2023 season fell by 29.3% year-on-year to 29.7 million tons.
Vitaly Vavrischuk, head of research at the ICU investment house, said that the army labour including the fee military The massive increase in spending has also boosted the economy. National According to the Security Council, Ukraine will spend 1.5 trillion hryvnias (40.6 billion dollars) spent, which is about a third of its economic output.
This was nearly five times the planned pre-war defense budget.
Tens of billions dollars foreign aid came in both to eliminate the budget deficit and to arm the Ukrainian forces.
But despite the positives, Ukrainian war is far behind where it was before it started. And the economic damage is staggering.
The occupation destroyed schools, hospitals, ports, roads and bridges. Kyiv According to the information of the School of Economics as of December, the damage to the infrastructure as a result of the war is 138 billion dollars organized.
Poverty rates have increased and tax the budget deficit is predicted to reach 38 billion dollars in 2023 after the collapse of revenues. The government is dependent on Western aid to cover it – much of it USA and Europe from the Union.
“The Ukrainian government has taken measures to help reduce the monthly deficit to $3-3.5 billion in 2023, which is still a large number,” said Finance Minister Serhiy Marchenko, noting that infrastructure investments are also needed to strengthen the recovery process.
President Volodymyr Zelenskiy’s government has urged donors to start planning for massive reconstruction this year, although it acknowledges that large-scale construction will be difficult until some peace is restored.
According to Marchenko, who said at the last round table held in February that he often heard the noise of attack drones over his house or the building of the ministry, 40%-60% of the energy sector was damaged.
Business events are often held in underground shelters for security. Blackouts are regular. Novus’ Panasenko said the company will close about 30% of store hours in Kyiv in December and about 30% in January. 20lost %.
The steel sector, the main pillar of the economy, is one of the hardest hit. Before the war, Ukraine was the 14th largest steel producer in the world.
Two leading steel producers, Azovstal in Mariupol and MMK Illicha, were destroyed and officially declared bankrupt.
The rest are struggling with power outages.
“Blackouts are a big problem for companies like ours,” said Mauro Longobardo, CEO of ArcelorMittal Kryvyi Roh. The company has recently started importing electricity, but the costs have been high. He did not provide further information.
Ukraine’s electricity system is connected to the European grid, where prices are higher, and it imports power from neighboring Slovakia.
Energy shortages are not the only problem for Arcelor.
Longobardo said his warehouse in Kriviy Rokh, about 400 km (250 miles) southeast of Kiev, was hit by three Russian missiles in early December, killing a worker. perished has been
Arcelor recently free the mining facility in the decommissioned area was littered with mines and most of the associated infrastructure was damaged.
Logistics is another headache for a company that used to export 80% of its output. Russia closed Ukraine’s Black Sea ports, and Longobardo had to work on new export routes through Poland.
Despite the difficulties, Arcelor, the largest foreign investor in Ukraine, is determined to stay in the company.
The largest employer in Kriviy Rokh, Zelensky’s birthplace, has laid off 26,000 workers despite falling production. Salary saved in the list. Longobardo said that Arcelor will invest 130 million dollars this year. Now such plans are rare.
The forecast for some other sectors is more positive.
Ukraine imported 669,400 generators last year, including more than 300,000 in December alone, Economy Ministry data shows. Panasenko said that 52 of Novus’ 82 stores are already equipped with generators.
ICU’s Vavrischuk saw that the economy continues to adjust and that sectors with high public funding will benefit the most.
But glaring security risks have deterred private investment, crucial to a robust recovery.
Ukraine has a mixed record in attracting foreign private investment. In 2021, it was the second lowest country in Europe, behind only Russia, in Transparency International’s Corruption Perceptions Index.
Vavrischuk said that it is necessary to ensure the rule of law, transparency and fair competition in the country.
“Participation in post-war reconstruction can be attractive for investors. “But we still have to deal with all these issues (transparency and corruption) that we don’t have time for before the war starts.
Report by Olena Harmash; Edited by Mike Collett-White and Daniel Flynn
Our standards: Thomson Reuters Trust Principles.
2023-02-27 11:01:45
Source – reuters
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