Ukraine’s Resilient Economy Thrives Despite Ongoing War

Ukraine’s economy has proved to be a resilient one. Notwithstanding the ongoing war, most Ukrainian companies continued working, and during the second year since the full-scale Russian invasion some have even increased their activity. Kyiv Post spoke to Katerina Morozova, Head of the European Business Association (EBA) Odesa – Southern Ukraine Office.

Assessing the resilience of Ukrainian companies amidst the ongoing war

Businesses in Ukraine continue to operate and show financial results even in such difficult conditions. We see a gradual but steady trend of recovery in business activity and financial performance starting in 2022.

Currently, 78 percent of the Association’s member companies are operating at full capacity, while a year ago only 54 percent were fully operational. The number of companies with restrictions on their operations continues to decrease – from 46 percent last year to the current 21 percent. The most common restriction remains the reduction of the companies’ geographical scope of activity. Currently, 1 percent of the companies surveyed are not operating.

The majority of companies, namely 88 percent, pay salaries in full, while 15 percent pay bonuses or additional funds. At the same time, 43 percent of the companies have increased the salary level for their employees. The number of companies that reduce the level of pay or dismiss personnel in 2024 remains quite low and currently stands at 5 percent and 3 percent, respectively.

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Companies support the Armed Forces of Ukraine (AFU) and the number of their own employees’ in the AFU remains high, with as much as 57 percent of respondents continuing to provide financial support. In addition, 45 percent supply their own products to the needs of the AFU and vulnerable groups, 26 percent provide services, 18 percent provide medicines, and 12 percent supply protective/defense equipment. The volume of assistance to the army and the population from businesses has remained stably high since the beginning of the full-scale invasion.

Ukrainian businesses maintain financial resilience despite significant losses from the war. Currently, 46 percent of the surveyed companies have financial reserves for more than a year, 19 percent for a year, 24 percent for six months, and 6 percent for several months.

Critical factors for successful reconstruction

The war unleashed by Russia against Ukraine has caused significant damage to the Ukrainian economy. Many businesses have been destroyed, others have lost markets or supply chains. However, in order to achieve success in this direction, it is necessary to carefully consider several critical factors:

• Fighting corruption. Corruption is a serious threat to any economy. Ensuring transparency, anti-corruption laws and effective control over the activities of government bodies will help reduce corruption risks and attract more investment.
• Business regulation reforms. Simplifying business registration procedures, reducing bureaucratic barriers and improving the legal system are key aspects that will help support entrepreneurship development and attract more investment.
• Human resources development. Investing in education and skills development of workers is key to creating a competitive workforce that meets the needs of the labor market.  

Katerina Morozova

Among the main drivers of change in business sentiment, top managers cite the military situation, the mobilization situation and uncertainty with regard to international aid (above all from the US).

At the same time, much will continue to depend on international support – whether it will remain at the same level, which would allow us to keep the front line and the macroeconomic situation stable.

Ukraine’s preparedness to welcome international investors: ensuring transparency and legal integrity

Before the war, the main problems were the lack of rule of law and a weak judicial system. The problem of corruption is closely related to these factors. When we talked to investors about the main obstacles, they always singled out these problems among their main concerns. However, when we analyze other countries, we see that the situation in Ukraine is not so bad. The problems with corruption sometimes seem exaggerated. But the judicial system does not really work the way it does abroad, which makes it difficult for investors to feel confident and get guarantees.

Investors see the news about the events in our country, and for them it becomes an obstacle to making a decision to invest in Ukraine. Those companies that already operate in Ukraine do not feel fear, because they are already familiar with our territory and understand how to work here. We need to work with them, especially when the general perception of Ukraine abroad is reduced to such concepts as “loans, corruption, war.” That’s why we, as an association, decided to launch a new project “Global Business for Ukraine.”

The project aims to create an international business network to promote opportunities in Ukraine. This network will be a significant complement to economic diplomacy, which, in our view, will enable more effective work by engaging investors who either know little about Ukraine or have too much negative information. It is important to understand that investors often study how to do business in Ukraine and with whom to collaborate. They learn about local business processes, and when this is overshadowed by a negative background of corruption and lack of rule of law, the decision to invest in Ukraine can become very difficult for them.

Comprehensive work is needed. On the one hand, within the country, we must ensure the effective operation of our institutions. Special attention should be paid to the judicial branch to ensure it truly works in favor of citizens.  

On the other hand, we must actively work abroad, expanding information about the opportunities and advantages of doing business in Ukraine. When communicating with members of our association, we see that many of them successfully conduct their business even in modern conditions.

Amidst the challenging times, Ukraine has seen notable investments that underscore its resilience and potential for growth:

• Bayer Group is injecting €60 million ($65 million) into seed production despite the ongoing war with Russia. This investment includes expanding drying capacities, constructing bomb shelters for employees, and upgrading machinery and equipment.
• Carlsberg Ukraine unveiled a significant investment project in 2023, injecting Hr.1.5 billion ($39 million) into a new production line at the Kyiv Brewery. The line, equipped with cutting-edge technology, aims to enhance operational efficiency, meet consumer demands, and boost brewery capacity by 80 percent.

Despite the challenging time, the war has not stopped investment activity in Ukraine. Of course, the risks have significantly increased, but new opportunities have also emerged for those willing to seize them.