Ukraine Country Report Apr22 - April, 2022

April 8, 2022

Horrifying images emerged from the massacre in Kyiv’s suburb of Bucha on April 3, where retreating Russian soldiers murdered a reported 350 civilians in cold blood. The streets strewn with bodies accompanied by reports of summary executions and the systematic rape of women in the suburb of Kyiv that was retaken by the Ukrainian army as the Russian forces retreated.

Video footage widely shared on social media showed armoured vehicles driving through a ruined landscape, weaving between the corpses lying on the road. In some cases the victims appeared to have had their hands bound behind their back. In another one man appears to have been shot while riding his bicycle and fell in the road still astride the bike.

The war in Ukraine continues and is causing massive destruction to the Ukrainian economy that will take years to repair if the money can be found to pay for it. Ukraine lost $565bn due to Russian military aggression, according to the Deputy Minister of Economics Yulia Svyridenko, which included lost earnings and devaluation in its calculation. But just the physical damage to roads, infrastructure and buildings amounts to around $100bn as of the end of March, according to the first estimates. For comparison, Ukraine’s last Stand By Agreement (SBA) with the International Monetary Fund (IMF) was for $5bn over 18 months. Ukraine is spending an estimated $10bn a month on the war with Russia, but has received an estimated $25bn from its partners to fund the fight and a lot more has been promised.
“These figures will be growing every day, unfortunately. Despite all obstacles, Ukraine will seek to recover compensation from the aggressor. Remedies will be sought both by court decisions and by transferring to our state the frozen assets of the Russian Federation,” Sviridenko said.

Currently, the valuation of the destruction is as follows:
- $119bn loss of infrastructure (almost 8 thousand km of roads destroyed and damaged, dozens of railway stations, airports);
- $112bn decline in 2022 GDP;
- $90.5bn in civilian property losses (10mn square meters of housing, 200,000 cars, 5mn people suffering food insecurity)
- $80bn in loss of enterprises and organizations
- $54bn in losses from direct investment in the Ukrainian economy
- $48bn in losses to the state budget

Ukraine's GDP decline in the first quarter of 2022 is 16%, and the annual decline may reach 40%, according to official estimates. Industries in which remote work is impossible have suffered the most. These are air and sea transportation services, where the business works directly with consumers. Although many companies have suspended operations, the economy has begun to recover at the end of March, and businesses in safe regions are returning to work. In particular, it is worth noting that farmers have already started sowing fields.

In economic recovery, priority is given to industries that directly ensure the livelihood of citizens and strengthen defensive capabilities. These priority industries are agriculture, food production, and retail chains, through which these products are delivered from the producer to the consumer.

Ukraine's economy will shrink by a fifth this year, according to the European Bank for Reconstruction and Development and then recover in 2023 if everything goes according to the scenario of a ceasefire in a couple of months. This forecast is fraught with severe risks of deterioration "in the event of escalating hostilities or restrictions on gas exports from Russia," the organization said in a report. “A truce is forecast to be reached in a few months, and the country's recovery could begin in 2023, with the economy growing by 23% next year,” the EBRD said.

In the midst of the war the first grain exports of the season left Ukraine, but the initial estimates is that the harvest will be reduced by around 7mn tonnes from the 46mn tonnes that were exported last year. Between them Ukraine and Russia account for 25% of global exports, but the reduction of Ukraine’s production of grain will have less of an impact than at first glance as global production of grain, including domestic production, was 779mn tonnes and farmers planted more at the start of this season than normal anticipating trouble in Ukraine. In this context Ukraine’s missing 7mn tonnes is only 0.9% of global production and with the extra grain planted the shortfall of grain will not be as bad. The pain will be felt regionally with Middle East and North Africa (MENA) being especially exposed to Ukrainian grain imports.

The war could also have radical long-term effects on regional politics with the European Parliament looking to support Ukraine’s EU membership candidate status. The President of the European Parliament, Roberta Metsola, during her visit to Kyiv in March, stated that Ukraine “could count on the support of the European Parliament in gaining the status of a candidate country for EU membership,” but stopped short of saying Ukraine “will” be offered offered members.

The challenges the economy is facing are multiple. Inflation is one of the major headaches. The National Bank of Ukraine (NBU) suspended its monetary policy meetings until the situation stabilises, leaving rates on hold at 10%.

Annual inflation was already high at 10.0% y/y in January, unchanged from the previous month, State Statistics Service reported on February 9. Ukraine’s consumer prices jumped 1.3% m/m in January after growing 0.6% m/m in December, due to increases in prices for food, transportation and utility services.

The International Monetary Fund says Ukraine needs about $4.8bn in external financing this year, and the country's GDP will shrink by 10% if the war ends soon. However, the IMF said the economic contraction could be much deeper, in the range of 25 to 35%, based on real-time GDP declines in countries such as Iraq, Lebanon, Syria, and Yemen.

The fund's estimates of Ukraine's financing needs should be seen as an absolute minimum and as a bridge to the point where a post-war comprehensive assessment will determine the real financing needs, which are likely to be much higher. In addition, the IMF is creating a trust fund that allows states to channel resources to Ukraine.

Ukraine’s GDP increased by 3.2% in 2021. Despite the pandemic, the ongoing war, and the threat of the Russian invasion, Ukraine achieved its highest real gross domestic product growth in history – almost $200bn, according to the Ministry of Economy.

To view this extensive report in full including details such as —

  • Macroeconomic Analysis
  • Politics Analysis
  • Industrial sectors and trade
  • FX, Financials and Capital Markets
  • And more!

For a one-off purchase click here

For an annual subscription click here

For a free sample click here

Related Reports

Turkey Country Report Aug22 - August, 2022

Economically, August will be a ‘hot’ month as per usual. The USD/TRY pair may crash again. On July 27, the Fed’s open market committee delivered another 75bp rate hike in line with ... more

Ukraine Country Report Aug22 - August, 2022

Ukraine’s economy experienced a huge negative shock from the invasion. Because the economy has already contracted so much and the government has to cover enormous military spending, the fiscal ... more

Russia Country Report Aug22 - August, 2022

Russia Inc is doing better than expected despite sanctions. International Monetary Fund Chief Economist Pierre-Olivier Gourinchas told AFP in an interview that higher energy prices are keeping Russia ... more

Dismiss