Ukraine’s economy is currently suspended between two competing forces. On one end, the Russian invasion has pulled it consistently toward decline: a 25% and accelerating poverty rate, a 35% contraction of gross domestic product, an inflation rate rising above 26%. On the other end are billions of dollars in military and humanitarian aid to the country, which experts say keep the economy stable.
President Volodymyr Zelenskyy has said Ukraine needs around $5 billion a month and $55 billion next year to cover the deficit and begin rebuilding. At least for the time being, Ukraine seems to be getting by on less, says researcher Rajan Menon.
Why We Wrote This
As the war with Russia grinds on, Ukraine’s economy is under pressure and dependent on foreign aid. The average Ukrainian faces an uncertain future, but is still finding ways to persevere.
But the longer the war goes on, the more expensive it gets, no matter how many weapons flow into the country. Ukraine has no shortage of willpower to fight, but how long can the country afford it?
“As long as Western aid continues to flow in … they can survive,” says Professor Menon. But without the support, “it will be an economy that is subject to enormous strain and people will find basic life, basic things that we take for granted, much more difficult to come by.”
Last January, Oleksandr Kachanovskyy and his family put all their savings into two big purchases: a new car and new furniture for their home in Mariupol.
A month later, Russia’s invasion destroyed that second purchase. Shelling and street fighting leveled the city over a three-month siege. “There was no place to live,” says Mr. Kachanovskyy. “The conditions were unbearable.”
So in late March, Mr. Kachanovskyy and his family packed into their new Volkswagen and drove to Lviv, where his father had once lived. They spent two weeks with family and then found free housing in a dormitory for students at the local hospitality college, on the outskirts of the city, surviving on his salary alone.
Why We Wrote This
As the war with Russia grinds on, Ukraine’s economy is under pressure and dependent on foreign aid. The average Ukrainian faces an uncertain future, but is still finding ways to persevere.
He, like millions of other Ukrainians, is caught in an economic tug of war. Ukraine’s economy is currently suspended between two competing forces. On one end, the Russian invasion has pulled it consistently toward decline: a 25% and accelerating poverty rate, a 35% contraction of gross domestic product, an inflation rate rising above 26%. On the other end are billions of dollars in military and humanitarian aid to the country, which experts say keep the economy stable.
President Volodymyr Zelenskyy has said Ukraine needs around $5 billion a month and $55 billion next year to cover the deficit and begin rebuilding. At least for the time being, Ukraine seems to be getting by on less, says Rajan Menon, a senior research scholar at Columbia University’s Saltzman Institute of War and Peace Studies. But the longer the war goes on, the more expensive it gets, no matter how many weapons flow into the country. Ukraine has no shortage of willpower to fight, but how long can the country afford it?
“As long as Western aid continues to flow in … they can survive,” says Professor Menon. But without the support, “it will be an economy that is subject to enormous strain, and people will find basic life, basic things that we take for granted, much more difficult to come by.”
For now, Mr. Kachanovskyy feels fortunate to have a home and some income, starting as the dormitory’s nighttime security guard last fall. With subsidized housing, his family can survive on the small salary. “Of course, our income is not that big,” he says, “but it’s enough and could be much worse.”
Diminishing employment, rising costs
Lviv is a portrait of the country’s fragile, and often contradictory, economy. Its western location has made it a sanctuary for citizens fleeing the war. Some 400,000 displaced people stayed in Lviv at some point last year, though only 200,000 remain, says Andriy Moskalenko, the city’s deputy mayor for economic development.
These displaced people need housing and income. While the city has been able to provide temporary shelter through renovated dormitories, like the one Mr. Kachanovskyy lives in, jobs have proved more difficult.
On the official regional job center registry, there are only 10,000 available positions, says Orest Hryniv, deputy head of the Lviv region’s department of economic policy. More can be found on online platforms, he says, but there is still a large gap between job needs and job openings. Even those who do get work may find themselves making wages that are unsustainably low. About 41% of the jobs on the official registry are in the service economy.
“The salaries that people receive in these jobs are not [high enough to] help people to afford the renting and also to take care of their families,” says Mr. Hryniv.
Meanwhile, the streets of Lviv are busy and businesses are open – though they’re often powered by generators humming outside. Souvenir shops sell patriotic tchotchkes, from mugs adorned with Molotov cocktails (“Smoothie, Ukrainian Style,” they read) to traditional Ukrainian garb. Street markets for groceries and other goods are still active. Operating shops suggest consumer demand, and disposable income.
Regardless, that income has lost much of its value in a year of rapid inflation. Mr. Kachanovskyy, speaking on the ground floor of the dormitory as students pass in and out, says much of his family’s monthly budget is spent on food and fuel, both of which have become more expensive.
“I don’t know when this will be over,” he says, “and the prices will be rising for sure again.”
Nationwide, the war has forced the Ukrainian government to budget tightly. Mr. Moskalenko says the military, critical infrastructure, and hospitals occupy almost all of Lviv’s spending, just as they do nationally. Inflation has made those budget decisions more difficult. Already, he says, there have been government layoffs.
Noah Robertson/The Christian Science Monitor
“We can survive”
Just blocks away from the college dormitory is the Lviv employment center, housed in a large administrative building. In the atrium is a series of standing bulletin boards, advertising openings and training opportunities – many that the region will subsidize – across different industries. Aside from employees, the building is almost empty.
On the second floor, Oleh Risny, head of the employment center, sits at a large desk next to a conference table and Ukrainian flag. Since the start of the war, he says, government unemployment benefits have fallen in amount and length – from nine to now three months. That’s meant fewer people visiting centers like his, atop of other factors such as men fearing conscription if they register as unemployed. The lack of visitors is “not about a good economic situation,” he says. “It’s about changing legislation.”
Ukraine already had problems in taxing its unofficial economy, he says, which makes up a large share of employment around the country. Those have grown more acute during the war, when tax revenues are scarcer. Other offices like his have lost 30% to 40% of their staff in short spans. They’re bracing for something similar, says Mr. Risny.
“But we understand why it is,” he says. “We can survive.”
So can Mr. Kachanovskyy. “We are very glad for these conditions,” he says. He, his wife, his son, his daughter-in-law, and his two grandchildren split two rooms upstairs – though his daughter-in-law just left to work abroad and his son, who registered as unemployed months ago, hasn’t been able to find a job.
He, like many other Ukrainians, lived through the 1990s, when a toddling independent government mismanaged the economy into crisis. Industrial production and GDP losses were higher than America’s during the Great Depression. In 1994 alone, GDP fell by 23%.
“I am sure that the ’90s were worse than this,” says Mr. Kachanovskyy, who worked multiple jobs and sold personal possessions just to get through. Now he has his family with him, he has his needs met, and he has a job that keeps him from going crazy, he says.
“We have nothing to complain about. Of course, it was much better before the 24th of February. Now we have what we have.”
Oleksandr Naselenko supported the reporting of this article.