In the best case scenario, the Ukrainian Ministry of Economy expects GDP to rebound by 15.5% in 2023. At worst, an additional 0.4% decline.
The Army and the economy, the two things reinforce each other: on the one hand, the counter-offensive of the Ukrainians pushes back the Russian troops, frees occupied territories, on the other a productive system that resists increases the chances of military victory . “I believe that Putin’s defeat will depend on the strength of our economy,” says Igor Liski, 43, an entrepreneur who has restored his factory which was hit by Russian bombs in the spring. A wood processing plant west of Kiev should be running at near full capacity by the autumn. «Ukraine needs companies to employ, pay taxes, export products. All companies that can, must produce, ”Liski tells the Wall Street Journal. The financial daily tries to investigate the state of the Ukrainian economy – seven months after the start of the war, and in the aftermath of the raid to the east that has stolen some 6,000 square kilometers from the Russians. The verdict: “After the initial deep collapse, although clearly suffering, the economy is stabilizing.” It is the result, in addition to the skill of the army, of timely fiscal and monetary choices and the flexibility of businesses. In the spring, at the beginning of the invasion, analysts believed the economy would halve; today they expect a decline in GDP of 30%, because in the summer there was a resumption of activity. “It seems the economy is adapting,” says Tymofiy Mylovanov, head of the Kyiv School of Economics. Making predictions is difficult, it depends a lot on how the war will evolve, so the latest rout of the Russians instills cautious optimism. The best of the possible scenarios, according to the Ukrainian ministry of economy, is a rebound in GDP of 15.5% in 2023. The worst, an additional decline of 0.4%.
Government and central bank have taken swift measures, building on the experience of past crises. They pegged the currency to the dollar, imposed capital outflow controls, printed money to keep the country solvent. Then reduced corporate taxes, suspended sales taxes, and cut import duties. The currency has devalued and inflation has risen more than 20%, a lot, but not out of control. Unemployment down, after having soared to 35 percent. The fuel crisis is also better, really serious at the beginning of the invasion, with images of long lines waiting at the gas stations. The supply of diesel, crude oil and gasoline, coming overland from Russia and Belarus, or from the Black Sea, which was in turn blocked, had stopped. But buying from all over the world (except, for obvious reasons, from Russia), imports returned in July to 770,000 tons, almost as much as one million a month before the war.
Deep wounds remain. In Zelensky’s hometown, Kryviy Rih, is the largest Ukrainian steel mill, owned by ArcelorMittal. Today the factory produces only 20% of its pre-war volume. He has reduced wages, and if things do not improve he will have to fire, says Mauro Longobardo, the Italian at the head of the multinational in Ukraine. War also costs money, and there are huge budget deficits to be bridged (roughly $ 5 billion every month). Western funding is lagging behind, especially European funding, which leaves Kiev too dependent on printing money, an unsustainable long-term remedy.
Of the 9 billion euros pledged by Brussels, only one has so far arrived. However, Europe is holding on to sanctions, which actually hit Russia heavily, and that is why Putin takes revenge by cutting off the gas. With very serious consequences: Rising energy prices, as well as bottlenecks in supply chains, are pushing the economy closer to recession. In July, according to the latest estimates, the Eurozone recorded a decline in industrial production of 2.3 percent. The worst figure in the last two years.
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