Conflicts & War

Ukraine’s GDP slumps 30.4% amid Russian invasion

By Rostyslav Averchuk

Lviv, Ukraine, Jan 6 (EFE).- The Ukrainian economy registered its worst-ever yearly economic decline due to the Russian invasion although fared better than gloomier predictions previously suggested.

Ukraine’s gross domestic product (GDP) slumped 30.4% in 2022 amid widespread physical destruction, power outages and huge demographic changes caused by Russia’s full-scale invasion.

“Solidarity is something that has defined Ukrainian business during the Russian invasion,” Marina, an IT project manager from Dnipro, tells Efe.

She has witnessed how various small businesses have cooperated to share power generators and heating appliances to mitigate the effects of power cuts on their ability to service the clients.

“A massage saloon I attend regularly doesn’t have a generator so the owner makes sure to borrow a generator to heat the premises from he neighbors whenever a client is set to come during a power cut,” Marina says.

She believes that it is this spirit, as well as Ukraine’s ability to adapt its energy system to cope with Russian missile and drone attacks, that has helped curb Ukraine’s historic economic slowdown slightly.

The country’s economy ministry said Thursday that Ukrainian GDP has fallen 30.4% rather than the 37% predicted back in December, and that some 28% of Ukrainians had been left without a job.

“This is the worst result since gaining independence in 1991, but better than most experts expected at the start of the full-scale invasion, when estimates ranged from a 40 to 50% drop in GDP or even more”, the ministry said.

Throughout the invasion, the fall in economic activity was driven by the physical destruction of many productive assets, such as large factories in the east of the country and agricultural infrastructure in the south, as well as by the large flows of refugees within and from the country.

For instance, the metallurgical industry, the backbone of the country’s exports, lost one third of all of its assets as the Azovstal and Illicha plants in Mariupol were completely destroyed while ArcelorMittal Kryvyi Rih and Avdiivka Coke plant were damaged. With exports through the Black Sea and Azov Sea ports completely blocked, production in the industry fell by about 70%.

The situation in the agricultural sector, another driver of the economic growth in recent years, has been rescued by the United Nations-backed “grain initiative” that helped restart exports from three Ukrainian ports in Odesa area. According to deputy minister of economy Taras Kachka, corn became the number one export from Ukraine in 2022, both in terms of quantity (25 million tonnes) and value ($5.95 billion).

The relative adaptation to war-time conditions, which saw some displaced businesses restart production in western and central Ukraine and exports increase during the third quarter of 2022, even led to more optimistic predictions about its possible growth in 2023, with the World Bank saying in early October it expected Ukraine’s economy to grow by 3.3% the following year.

However, massive Russian strikes against Ukraine’s energy infrastructure that began in October dealt a new blow to the country’s economy and made any predictions even less reliable, Hlib Vyshlinskyi, head of Centre for Economic Strategy, told Efe.

He explained that a lot hinged on the ability of Ukraine’s air-defense to protect its infrastructure with one missile potentially capable of leading to disproportionate damage. EFE


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