2
Ukraine After a sharp contraction in the first year of the war, economic activity is stabilising. The business sector is adapting to the war conditions, allowing for an expansion of production. Exports are benefitting from closer trade ties with the European Union and the “Black Sea Grain Initiative” that permits agricultural exports from otherwise blocked ports. Inflation is projected to moderate helped by lower food and energy prices. The economy remains highly dependent on international financial assistance. Macroeconomic policies should continue to secure economic stability by avoiding excessive public deficits and inflation. Structural policies should focus on supporting resilience and bolstering the reconstruction and recovery capacity of the economy by strengthening public governance and facilitating labour reallocation. The war led to a strong economic contraction The strong post-pandemic recovery was interrupted by Russia’s war of aggression against Ukraine. Large labour and financial resources are assigned to the war effort and important industrial centres and swaths of agricultural land have been occupied. In addition, human costs are mounting with the United Nations (UN) estimation of 24 000 civilian casualties (of which more than a third were fatalities) as of May 2023. Moreover, one third of the population has been internally or externally displaced. According to the UN, more than 8 million people, mostly women and children, have left the country. Physical war damages to building and infrastructure are estimated by the Kyiv School of Economics Institute to have reached nearly USD 150 billion. Production capacity has been further damaged by additional supply-chain disruptions from the ceasing of civilian flights, blocked ports, and widespread electricity shortages. In consequence, the economy shrank by over 29% in 2022.
Ukraine
1. The industrial confidence indicator refers to expectations on production, order books and stocks of finished products. 2. Expected changes in employment of industrial enterprises (as described in footnote 1.) over the next 3 months. Source: State Statistics Service of Ukraine. StatLink 2 https://stat.link/hmu3o7
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023