Invasion or not, Ukraine’s economy is already paying a price

KIEIV: In his open-plan office in central Kiev, Dmytro Voloshyn lays out the difficult issues he has dealt with over the past few weeks as fears have mounted over a possible Russian invasion.

What if things get out of hand? What to do with foreign staff? What would happen if martial law is declared? What if the banking system collapses? What to do if the Internet is cut off?

“We basically had to prepare a contingency plan with answers to all these questions,” he told AFP, showing a chart on his laptop detailing the different options for different scenarios.

Preply, the company co-founded by Voloshyn in 2013, prides itself on being one of the leading online platforms connecting language students to teachers across the world. It employs some 400 people in Kyiv and Barcelona.

With its elegant office design, climbing plants on the walls, a cafe for employees, it looks like a Silicon Valley start-up and is considered one of Ukraine’s success stories in the high-tech sector.

But like the rest of the Ukrainian capital, it is currently living a strange double life. Work is going normally, people are continuing with daily chores and nothing seems out of the ordinary.

At the same time – as Western leaders warn of the threat of Moscow troops massed on the border – some people are preparing for the worst.

According to a survey by the European Business Association, which includes many multinationals operating in Ukraine, 40% of its members have already prepared emergency plans and 40% intend to do so.

“We have a plan, but we’re not leading because we’re very confident that the situation will stay as it is,” Voloshyn, 34, said.

Voloshyn points out that Ukrainian businesses, like the general population, have grown accustomed to living in a heightened state of alert since the heightened Kremlin seized Crimea in 2014 and began fueling a separatist conflict in the east that has killed more than 13,000 people.

“We are not panicking because we know that this situation has been going on for eight years already for us,” he said.

“There’s always been this kind of tension here in Ukraine, and now it’s more immediate and it’s obviously escalating, but we’re not in panic mode. »

In fact, the crisis in 2014 pushed his company. He pushed them to grow the business overseas as Ukraine’s economy melted and they sought to hedge against the turmoil.


The risk of a Russian invasion, Moscow denies plotting, has yet to cause catastrophic consequences as it did then.

But it’s already having a very real impact, freezing projects and scaring off some investors.

The central bank lowered its growth forecast for 2022 to 3.4 percent from 3.8 percent.

It has also had to spend more than $1 billion so far this year to keep the local currency, the hryvnia, afloat as worried investors move money out of the country.

Despite this, the currency has again fallen to its lowest level in four years, fueling inflation and undermining household purchasing power in one of Europe’s poorest countries.

The situation prompted President Volodymyr Zelensky to try to counter some of the more alarmist warnings coming from the West, insisting the priority was to stabilize the economy rather than stir up “panic”.

For Sofya Donets, an economist at investment firm Renaissance Capital, Ukraine is now in a stronger position than in 2014 to withstand financial pressure.

It has more than doubled its reserves and is due to an influx of Western aid, with the European Union committing an additional €1.2 billion and ongoing negotiations to release new funds from the International Monetary Fund.

“However, this only works to smooth out the effect of prolonged turbulence, not full-scale military conflict,” she says.


Currently unable to borrow on international markets, the Ukrainian state remains dependent on its international donors.

The government complains that the country is suffering from a geopolitical situation beyond its control despite having strong economic “fundamentals” it insists.

“We have been living since 2014 in a state of permanent threat from Russia, and now this is becoming news in the world,” Finance Minister Sergiy Marchenko said in an interview with the Ekonomichna Pravda website.

“The tension cannot increase permanently,” he insisted in order to reassure.

Meanwhile, companies like Voloshyn are gearing up.

But even if the worst doesn’t come, economists warn that the spike in tensions is further denting the county’s long-term outlook.

“The risk premium for doing business in Ukraine has certainly increased,” Lilit Gevorgyan, economist at IHS Markit.

“This perception of risk will not come down sharply unless tangible progress is made between Ukraine and Russia to resolve the conflict odds. Of these are thin. »

Christi C. Elwood