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What Ukrainian economy looks like after three months of war

After the shock of the first week of the war, the economy is moderately being revitalized in relatively calm regions. Enterprises are reopening, but a significant number of them are operating well below pre-war levels of workload. Such an integral assessment is given by the National Bank in its macroeconomic and monetary review for May.

The Page has prepared information about what happened to the Ukrainian economy in the three months after the Russian invasion.

Overall characteristics of economic situation in Ukraine

In March, hostilities engulfed 10 regions and the city of Kyiv, which together accounted for more than 55% of GDP in the past. In April, their number decreased to 6, which previously formed about 20% of GDP.

To maintain price and financial stability, the NBU fixed the exchange rate and imposed a number of administrative restrictions.So far there is no talk of a return to a floating exchange rate.

The decline in economic activity was also observed in relatively calm regions due to disruptions in supply and production chains, uncertainty and increased risks, outflow of labor force and additional costs.

The number of enterprises that have completely ceased operations has almost halved since the start of war (from 32% down to 17%). However, 60% of enterprises work below the pre-war capacity utilization level, almost 23% — work more than twice lower, the NBU reports.


At the end of April, most enterprises worked in agriculture and transport, and the processing industry resumed operations. The most difficult situation is in the construction and mining industries, trade remains much lower than the pre-war level.

Since the beginning of the war, the State Inspectorate for Architecture and Urban Planning has processed about 5,800 requests from customers. Including 2,200 reports about the start of construction work. The most active new construction begins in the Lviv, Zakarpattia, and Khmelnytskyi regions.

During the period of martial law, 6,726 loan agreements for a total amount of 24.38 billion UAH were concluded as part of the program "Affordable loans 5-7-9%".

Despite the martial law, Ukrainians more often began to trust the banks with their funds. In April, the total volume of deposit funds increased by 41.5 billion UAH and now amounts to 1.5 trillion. This is 6 billion UAH more than it was at the beginning of 2022.

Budget deficit

Decline in economic activity and government measures to stimulate the economy resulted in a significant budget deficit. It was financed by the placement of war domestic bonds (in March-April 135 bn UAH were issued, of which 70 bn UAH were bought by the NBU) and international financing.


The profound decline in economic activity and introduction of tax changes to mitigate the economic shock resulted in a substantial reduction in tax revenues.

However, revenues were supported by the early transfer of dividends by SOEs (in March), advance tax payments (both in March and April), as well as disbursement of the grant funds from international partners

Expenditures rose substantially, primarily those directed to military needs, social programs, as well as business support and reconstruction of the regions.

Financing received (excluding the IMF) in March amounted to USD 1.9 bn. This, together with the funds from the IMF under the Rapid Financing Instrument (USD 1.4 bn), helped maintain gross international reserves at a rather high level — USD 28.1 bn as of the end of March. But as of May 1, there were already $26.9 billion in reserves, as the NBU sold a lot to support the foreign exchange market.

Moody's estimates that international financial institutions and other donors have provided about USD 38 billion in financial support to Ukraine, of which USD 5 billion has already been disbursed since the invasion began, which should cover a significant part of the estimated funding needs for 2022. Opening an account with the IMF to direct donor resources to balance of payments and budgetary needs, including the ability for countries to transfer special drawing rights, will result in a further increase in funding.


Annual consumer inflation accelerated to 13.7% in March and to almost 16,4% in April.

Inflation in April was 3.1% compared to March, since the beginning of the year — 10.9%.

The rise in inflation was driven by supply chain disruptions, uneven demand, higher business costs, and the physical destruction of company assets during the war, the NBU believes. Recently, an important factor is the rise in the price of gasoline and diesel fuel.

Excess stocks resulting from limited export opportunities are putting pressure on prices.


At the same time, more and more companies are raising output prices. The share of those who did not change prices has decreased, although such enterprises still make up the vast majority (53%). At the same time, the share of those who increased prices continued to grow (from 23% in the last round of the NBU survey to 28%), most often increasing them by 5-10%.

Manufacturing and trade increased prices more often, while agriculture, energy, and services decreased them.

Labor market

Labor market is gradually recovering. However, growth in the number of job-seekers outpaces growth of vacancies. This factor puts pressure on lowering wages.


At the end of April a significant proportion of enterprises (54%) were forced to retain fewer staff and 34% — to pay lower wages than before the war. The share of enterprises that have not changed salaries (38%) is also declining, the NBU reports.

After a significant decline in March – early April, the decline in the number of vacancies stopped, however the number of CVs has resumed earlier and is growing rapidly.

According to the portal grc.ua, more than half of job-seekers are ready to agree to lower wages. A quarter of companies surveyed have not paid salaries since February.


The seaports of Berdiansk, Mariupol, Skadovsk, and Kherson are closed until control over the territories is restored. The work of the ports of Mykolayiv and Odesa is blocked by the occupiers. Only the ports of the Danube are working, work is underway to increase their capacity.

Export of grain by rail through the Czech Republic and Slovakia to Germany has been established. Bulgaria and Lithuania are preparing ports in Varna and Klaipeda to receive Ukrainian cargo by rail.

In mid-May, Ukraine and Poland agreed to ensure the possibility of grain transit through common border inspection posts, as well as to ensure its rail transit through the Werchrata — Rava-Ruska, Medyka — Shehyni, and Krościenko—Smolnica border checkpoints.

At the same time, Ukrzaliznytsia is facing difficulties due to damage from attacks by the occupiers and congestion on the tracks. The queues of cargo in the western direction are growing.

Progress of spring sowing campaign

To date, 4.4 million hectares of land have been sown (more than 30% of the plan of the Ministry of Agrarian Policy, which provides for 20-30% smaller areas than last year because of the occupation and mine-laying). Farmers are reorienting crops to less expensive and more popular crops (soybean, sunflower, buckwheat, and not corn).

Agricultural enterprises suffer significant losses, primarily in the south and east of the country, because of the seizure of grain by the occupiers, the destruction of elevators, and theft of equipment by the occupiers.

Economic expectations

The international rating agency Moody's has downgraded the long-term ratings of the Ukrainian government from Caa2 to Caa3. The agency has also changed the rating outlook to negative and emphasized that the review for a possible downgrade, which began on February 25, 2022, has now been completed.

Moody's explained that the negative outlook reflected a high degree of uncertainty about how the invasion will play out and what its credit implications will be.

The agency expects Ukraine's real GDP to shrink by about 35% in 2022, given the heavy human losses, significant damage to productive capacity and infrastructure, and very large population displacement.

Moody's expects the shelling to continue holding back significant economic activity through the end of the year. Although the economy will begin to gradually recover from 2023, the Russian invasion is likely to result in some irreversible GDP losses, even if significant external support is provided to help with the recovery.

A protracted military conflict will drain the government's financial resources: Moody's estimates financing needs this year at about $50 billion (35% of GDP in 2022) and predicts public debt to rise to 90% of GDP from 49% by the end of 2021.


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