{"id":10743,"date":"2025-11-14T17:39:22","date_gmt":"2025-11-14T16:39:22","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=10743"},"modified":"2025-11-14T17:39:22","modified_gmt":"2025-11-14T16:39:22","slug":"the-ukrainian-economy-under-bombs","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2025\/11\/14\/the-ukrainian-economy-under-bombs\/","title":{"rendered":"The Ukrainian Economy Under Bombs"},"content":{"rendered":"

In February 2022 Russia launched a full-scale invasion of Ukraine. Since then, the country has shown an unexpectedly strong capacity for resistance. Government and institutions have continued to work, the reform path has moved forward, and digitalization has allowed services\u2014including banking services\u2014to function even under bombardment. Citizens have mobilized through volunteering and donations. Women have taken on increasingly important roles in the labor market, and firms have searched for innovative solutions to energy and logistics problems. International assistance is indispensable: financial aid allows the country to cover expenses for healthcare, education, and support for those who have lost everything, while military aid is vital at the front and for national defense. While planning for reconstruction is already underway\u2014a task that will require enormous resources\u2014one must not overlook that Kyiv\u2019s extraordinary resilience remains fragile.<\/em><\/p>\n

 <\/p>\n

Since 24 February 2022, when Russia began its full-scale invasion, Ukraine has surprised the world with its extraordinary capacity for resistance. This capacity is even more remarkable when one considers the eight years previously spent defending its independence after Russia\u2019s annexation of Crimea in 2014, which marked the start of the war.<\/p>\n

EU Accession: A Hope in Difficult Times<\/strong><\/h3>\n

Ukraine is resisting. It does so despite Russia occupying about 20% of its territory, nearly five million citizens having emigrated, and thousands of civilians having lost their lives.<\/p>\n

Ukrainian resilience takes many forms: a government that continues to operate, businesses capable of adapting, citizens who work, donate, and refuse to give up. Added to all this is the crucial military and financial support from abroad.<\/p>\n

From the earliest days of the invasion, state institutions maintained their operations. The president, the Council of Ministers, Parliament, and the National Bank of Ukraine (NBU) remained at their posts, active and effective in both domestic and foreign policy. Requests for support from international partners were swift: right after the invasion, Kyiv formally applied for European Union membership and, a little over a year later, obtained candidate status\u2014a powerful symbol of hope during the darkest moments.<\/p>\n

The reform process has continued even during the war, with the goal of stabilizing the economy, supporting households and firms, and aligning legislation with the acquis communautaire<\/em>\u2014the body of rights, obligations, principles, policies, and rules that constitute EU law and that every member state must adopt. This has often followed the \u201cmoney in exchange for reforms\u201d approach requested by international donors. Part of Ukraine\u2019s economic resilience is due precisely to the transformations begun after 2014: the economy, and particularly public finance, has become more sustainable, while institutions\u2014including the National Bank of Ukraine\u2014have strengthened. Digitalization, launched between 2020 and 2021, allowed the banking system and public services to remain operational even during bombardments, when many people were forced to flee their homes and become internally displaced. Citizens continued to access documents, register businesses, and receive payments online. Technology thus became a shield. Of course, there is still a long way to go to meet the goal of EU accession by 2030.<\/p>\n

A Civil Society More Active Than Before<\/strong><\/h3>\n

Not only institutions but also civil society has played a decisive role. Today Ukraine has around 31.5 million residents: roughly five million have fled abroad in search of safety, and almost four and a half million are internally displaced. Supporting those most in need is a daunting challenge for a government with limited fiscal resources. Civil society rose to meet this challenge: many Ukrainians work and at the same time volunteer to support displaced people, vulnerable populations, the military, and hospitals. During the war, the role of NGOs has grown even further: some provide humanitarian assistance, others support the government in drafting reforms, and still others contribute to reconstruction. Volunteering has become the new norm, involving nearly all citizens in various ways.<\/p>\n

With so many men at the front, women\u2019s role in the labor market has also increased: today they perform jobs once considered male roles, drive heavy trucks, install solar panels, work in construction. Increasing numbers are also joining the armed forces.<\/p>\n

Businesses: Tenacious and Adaptive<\/strong><\/h3>\n

The reaction of businesses has been no less significant. With great flexibility, firms have adapted to the new reality. For Ukrainian businesses, war has meant disrupted supply chains, logistical difficulties, damaged or destroyed facilities, electricity shortages, and a lack of qualified labor. And yet even during the longest blackouts, Ukrainian companies continued to operate. Caf\u00e9s, supermarkets, and even hair salons worked with generators during the blackout periods of 2022\u20132024, when Russia had struck much of the country\u2019s electricity generation capacity. Firms began investing in independent energy sources, partly supported by subsidized bank loans from the government. Logistics improved from September 2023, when\u2014with the help of international partners\u2014the government secured the functioning of the Ukrainian maritime corridor through the ports of \u201cGreater Odesa.\u201d To address labor shortages, many firms turned to innovation and automation, resulting in increased labor productivity, which has historically been low by international standards.<\/p>\n

However, the resilience shown during wartime must not obscure Ukraine\u2019s structural economic weaknesses. Many firms still use obsolete technologies, and to continue resisting and ensure sustainable growth, the country must modernize its productive structure and introduce new reforms that establish clear and transparent rules for business activity and competition.<\/p>\n

Naturally, today the crucial sector is the military one. The weapons and technologies provided by friendly countries are not enough: Ukraine needs huge quantities of armaments. For this reason, numerous companies, large and small, have converted to military production while increasing investment in research and innovation. Foreign companies are also expected to arrive, attracted by the opportunity to test new military technologies in the Ukrainian market. It is likely that this sector will maintain a central role even after the war, since Kyiv will still need a strong military force to defend itself from possible future attacks.<\/p>\n

Why International Aid Is Vital<\/strong>\u00a0<\/strong><\/h3>\n

Ukrainian resistance would not have lasted long without international support. Kyiv had to increase defense and security spending drastically and immediately; these now account for more than 50% of the state budget. In 2022 the economy collapsed by nearly 30%, and the deficit\u20143% of GDP in 2021\u2014rose to about 20% that same year. To finance it, the National Bank of Ukraine printed large quantities of money.<\/p>\n

Since 2023, military expenditures have been financed mainly by taxes paid by citizens and firms, while nearly all civilian spending\u2014education, healthcare, support for displaced persons and the most vulnerable\u2014depends on international aid, which will remain essential in the years ahead. According to the Kiel Institute Ukraine Support Tracker, support for Kyiv\u2014military, financial, and humanitarian\u2014costs less than 1% of GDP for most partner countries.<\/p>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

Most foreign financial aid comes in the form of loans, which has pushed the debt-to-GDP ratio from 50% to nearly 100%. These are often loans tied to further\u2014and necessary\u2014economic and legal reforms. To give an idea of the scale: the EU has launched the Ukraine Facility package worth 50 billion euros for the period 2024\u20132027, while in 2025 another 50 billion dollars will come from the G7 through the ERA (Extraordinary Revenue Acceleration) mechanism, financed with the profits from frozen Russian assets.<\/p>\n

Militarily, the most substantial support has come from the United States, despite the interruptions in 2024\u20132025 that created serious risks for Ukrainian resistance. If weapons are indispensable at the front, air defense systems are equally essential for the country\u2019s life and economy, because they protect not only the population but also energy infrastructure, ports, and businesses. This is illustrated by events such as those on the night of 23 August 2025, when Russian missiles destroyed in Mukachevo\u2014near the Hungarian border\u2014an American company producing electronic components, or on the night of 28 August, when a residential building was hit, causing more than twenty civilian deaths.<\/p>\n

In short, military and financial support are the two sides of Ukraine\u2019s survival: one cannot work without the other.<\/p>\n

A Country to Rebuild<\/strong><\/h3>\n

Being resilient also means looking ahead to reconstruction. Currently, most reconstruction projects are based on loans from the World Bank and the European Investment Bank, mainly for emergency interventions. But rebuilding Ukraine will require enormous resources: the World Bank estimates damage exceeding 500 billion euros, without counting the territories still occupied by Russia.<\/p>\n

The absolute priority is housing recovery. Thousands of families have seen their homes destroyed or severely damaged, and internally displaced persons\u2014constantly increasing in number\u2014face not only very low state compensation, but also, at least so far, the absence of a social housing program.<\/p>\n

Another crucial priority is rebuilding the energy sector. Russia has destroyed much of the grid and electricity production capacity, leaving millions without light or heating. The emergency was handled thanks to the Energy Fund\u2014created by international partners\u2014which provided essential funds and equipment. In addition, the integration with the European electricity grid\u2014completed within days of the invasion\u2014allowed Ukraine to import energy during the most critical moments.<\/p>\n

Schools are also a major issue. Despite the war, Ukraine has tried to ensure school access: in Kharkiv and Zaporizhzhia, for example, underground buildings have been constructed to allow children to attend safely. Across the country, air-raid shelters have become central locations for in-person teaching, given the constant threat of missiles and drones. But these are still temporary solutions, destined to be replaced.<\/p>\n

Reconstruction must also follow the build back better<\/em> approach, with inclusiveness as a guiding principle. The war has greatly increased the number of people with disabilities, both civilians and military personnel: new homes, schools, and workplaces must be designed to be accessible to all.<\/p>\n

Postwar Challenges<\/strong><\/h3>\n

The future holds many challenges for Ukraine, even after peace arrives. The first is demographic: the population is shrinking and aging rapidly, while millions of Ukrainians now live abroad. Stable security guarantees\u2014and effective policies to facilitate their return\u2014will be necessary. Strategies capable of attracting international private investors will also be essential, since reconstruction requires far more resources than those currently available.<\/p>\n

Another unknown is \u201cdonor fatigue\u201d: keeping international attention and support high in the coming years will not be easy. To protect itself from future aggression, it will also be essential that sanctions against Russia remain strong, to weaken Moscow\u2019s economy.<\/p>\n

In summary, Ukraine has demonstrated an unexpected capacity for resistance during the war. But this resistance is fragile, resting on the extraordinary mobilization of civil society, the adaptability of businesses, and international support. Without military and financial aid from allied countries\u2014and without reforms aimed at strengthening competitiveness and productivity\u2014it will be difficult to turn this resilience into sustained recovery.<\/p>\n

 <\/p>\n

Oleksandra Betliy is a Leading Research Fellow at the Institute for Economic Research and Policy Consulting in Kyiv. She has over twenty years of experience as an analyst and more than ten years in project coordination. She is an expert in public finance, social policy, and the labor market.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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