WASHINGTON, DC — Ukraine’s economy may no longer be in free fall, but it remains in dire straits. The country’s GDP contracted by 6.8% last year and is expected to shrink another 9% this year, a total loss of around 16% over two years. While things seem to be, to some extent, stabilizing – the depreciation of the hryvnia eliminated the country’s current account deficit and a massive fiscal adjustment brought Ukraine’s budget back to cash balance in the second quarter of this year – the situation remains precarious.
Ukraine’s main economic challenges are not local; they are the result of Russian aggression. The country’s belligerent eastern neighbor has annexed Crimea, sponsored rebels in eastern Ukraine, waged a trade war, intermittently cut off its natural gas supply and threatened financial attack. So far, Ukraine has miraculously resisted these onslaughts with little international support – but it desperately needs help.
Russia’s annexation of Crimea in March 2014 took 4% of Ukraine’s GDP. Since then, Russian-backed armed forces have occupied territories in eastern Ukraine that accounted for 10% of the country’s GDP in 2013. Production in the Donbass region fell by 70% in the months that followed. followed, it cost Ukraine around 7% of its 2013 GDP.
To continue reading, register now.
As a registered user, you can enjoy more PS content every month – free.
Subscribe now for unlimited access to everything PS has to offer.
Already have an account? Login