How the Ukrainian economy survived the year of the Russian invasion

At the beginning of the 2022 invasion, the World Bank predicted a 55% drop in Ukraine’s GDP in 2022. In the end, the actual decrease was 31% – a lot, but far from what was expected.

During the war, the unemployment rate rose to 25%, the share of the population in poverty to 28%, and inflation exceeded 30%.

Production in the metallurgical sector (primarily concentrated in the east of the country) plummeted by 70%. The traditionally strong agricultural industry also suffered heavy losses due to the impossibility of exporting by sea. The destruction of the energy structure also induced a production slowdown.

The director of the Centre for Economic Strategy, Hlib Vyshlinsky, explains why the Ukrainian economy, despite everything, managed to survive and avoid the fall of the predicted scale:

• Due to unstable living conditions, Ukrainians are used to independently adapting to various circumstances and rely little on state assistance. Therefore, with the invasion, people and communities showed resilience and a resistance mentality.
• The government managed the crisis economy effectively. Despite the allocation of an incredible 43% of the budget for defence, the state continued to timely pay the salaries of civil servants and the pensions of retirees and even updated them with the growth of inflation.
• At the same time, Western aid,  both financial and military, remains vital. The importance of the latter for the economy cannot be underestimated. The more weapons and equipment Ukraine receives now, the greater the chances of ending the war sooner. Otherwise, if military aid is insufficient, the economic and political bill will end up being much more expensive for everyone.