Experts warn of Ukraine economic downturn amid continued Russian attacks
The Ukrainian economy is facing significant challenges due to ongoing Russian military aggression. According to a recent analysis by the Vienna Institute for International Economic Studies (wiiw), Ukraine's economic growth prospects are becoming increasingly bleak as the conflict drags on. The institute lowered its forecast for Ukraine's economic growth in 2023 to 0.6%, down by 0.4 percentage points from the previous forecast made in July.
The institute's report highlights the severe impact of Russian strikes on Ukrainian infrastructure, particularly energy facilities and Black Sea export terminals. These attacks have caused a substantial drop in Ukraine's grain exports, which plummeted by 70% in August compared to July. The Ukrainian steel industry is also suffering from the ongoing assaults. Furthermore, high inflation and interest rates are putting additional strain on the country's economy.
Olga Pindyuk, a Ukraine expert at the wiiw, noted that the coming winter will pose a significant test for Ukraine's resilience. The report suggests that Ukraine's economic survival depends heavily on continued financial and military support from international partners, although such support remains uncertain.
While Ukraine grapples with these economic challenges, Russia is also experiencing the repercussions of its prolonged military campaign. The wiiw's analysis points out that Russia is dealing with inflation fueled by a fuel crisis, which has been exacerbated by Ukrainian drone attacks on Russian refineries. In response, Moscow has implemented an export ban on fuel, reducing its advantage from high global market prices.
Despite these challenges, Vasily Astrov, a Russia expert from the wiiw, has stated that Russian President Vladimir Putin is unlikely to face difficulties in financing the ongoing conflict against Ukraine in the coming year. The Russian government can still secure funds from domestic banks. The wiiw projects that Russia's economic growth will be 0.6% in 2026 and increase to 1.3% by 2027.
The economic conditions in both countries underscore the significant impact of the conflict on their respective economies. Ukraine's economic woes are compounded by the destruction of critical infrastructure, while Russia faces sanctions and internal economic pressures.
The international community continues to watch the situation closely, with the potential ripple effects of the conflict affecting global economies and political dynamics. The ongoing war remains a pivotal factor in shaping the future economic landscapes of both Ukraine and Russia.
Source: spiegel.de