Since the outbreak of the Russian invasion on February 24, exports from Ukraine have been controlled, the sale of basic foodstuffs there has been rationed and production planned. In addition, some prices are capped. “Ukraine is moving to a war economy”declared Denys Chmyhal, the Ukrainian Prime Minister, on March 10.
This transformation occurred from the first hours of the conflict. At the end of February, the Ukrainian State plunged the economy into an artificial coma in order to protect it from the shocks to come. Capital flow controls have been put in place to filter the outflow of foreign currencies. The State now uses it to buy so-called goods abroad “essential”. The payment of customs duties has even been suspended in order to speed up the delivery of certain imported goods.
The country wants to avoid economic collapse at all costs, even if it means rebuilding factories elsewhere. “Part of the damaged productive apparatus can be rebuilt in the west, where the destruction is less significant, wants to believe Nataliia Shapoval, director of the KSE Institute, attached to the Kyiv School of Economics, although this obviously depends on the duration and extent of the conflict. » This is already happening in this area, where the United Nations Development Program is helping farmers displaced by war to cultivate new land on loan from the state.
The country’s granaries are filled with wheat, corn and soybeans, which cannot be exported, but will they remain so for long? National agriculture is also very dependent on the consumption of inputs, such as fertilizers, seeds or pesticides.
The other pillar of the resistance of the Ukrainian economy does not need land, fertilizer or transport infrastructure to function. The computer services sector, which contributed 4% to the national gross domestic product (GDP) before the war, is one of the most resilient. While 10% of the population has already fled abroad, the vast majority of the 250,000 engineers continue to work. Some contribute to the war effort in their own way, helping the state to protect itself from cyberattacks.
The State plays a central role in the organization of the economy. He must not only plan production and reorganize logistics, but also ensure the survival of businesses and distribute financial aid to residents. He lowered the corporate tax rate to 2%, then opened lines of credit at reduced rates to SMEs, from which farmers should soon benefit. In addition, compensation of 6,500 hryvnias (200 euros) was paid to almost 500,000 Ukrainians who lost their jobs because of the war.
According to estimates by the International Monetary Fund, Ukraine’s budget deficit is expected to reach $7.4 billion, or 4% of GDP, while the country’s economy is expected to contract by 35%.