War will continue to threaten Ukrainian economy

Significance

Although the economy has demonstrated remarkable resilience and survived the initial shock and devastation of the war, the prospects for growth remain bleak. Despite crucial inflows of foreign aid, financial stability is also under threat. The precarious economic recovery is now threatened by widespread electricity shortages caused by Russia’s missile campaign to destroy Ukraine’s power generation facilities.

Impacts

• Slow growth will exacerbate fiscal strains and could prompt the government to raise taxes.
• If the hryvnia comes under greater pressure, the NBU will reinstate some capital controls.
• Ukraine will continue to rely on external aid to compensate for the lack of domestically generated tax receipts.