Ukraine's economy in crisis: Russian attacks and rising costs of war
Massive attacks on industry and infrastructure are deepening Ukraine's economic crisis, and rising military spending threatens to cause a budget hole.
Quick Look
- Intensified Russian attacks in Ukraine are paralyzing the steel industry and agriculture, causing a decline in tax revenues.
- The costs of the war are rising to USD 190 million a day, and Kiev is struggling with a gigantic financial gap and the threat of withholding foreign aid.
AI-generated summary
Why It Matters
The Ukrainian steel industry before the war accounted for one-tenth of the economy.
The mayor of Kryvyi Rih in Ukraine, Oleksandr Vilkuł, told Reuters: It's about survival. Now we have to survive. After an intense series of Russian attacks in September using ballistic missiles and jet drones, the city's largest employer, the mining and metallurgical complex belonging to ArcelorMittal, suspended its operations.
The forecasts are alarming
Similar problems affect the entire Ukrainian steel industry, which accounted for one-tenth of the economy before the war. Big bets, including: they are standing in Zaporizhia and exports have been suspended. Russian drone and missile attacks, which intensified over the summer, destroyed factories and warehouses, damaged ports and railways, and forced entrepreneurs to discontinue their operations. As a result, economic growth slowed down and tax revenues decreased. According to economists' forecasts, the Ukrainian economy will grow this year by only 0.5-1.5 percent, compared to 1.8 percent. in 2025.
At the same time, the costs of waging war are rising rapidly
According to the chairwoman of the parliamentary budget committee, Roksolana Pidłasa, two years ago, one day of fighting cost Ukraine about USD 140 million, currently it is USD 190 million. In the first nine months of this year, the country spent over $44 billion on defense, while tax revenues amounted to approximately $42 billion. MP Pidłasa estimated that as a result of Russian attacks, the budget lost over UAH 49.5 billion (over PLN 4.3 billion) in tax revenues during this period. By the end of the year, losses may increase to UAH 70 billion (over PLN 6 billion).
Agriculture was hit particularly hard
Agriculture is the largest source of export revenues. Attacks on Black Sea ports led to a 36.6% decline in grain exports in September. on an annual basis.
Ukraine needs $56 billion this year to cover the financial gap, of which $27 billion is military spending. The government has been forced to freeze non-essential spending, including part of the rebuilding of damaged buildings and infrastructure, to fund the military, public sector wages and pensions.
The situation is complicated by the delay of some foreign financing due to the failure to implement reforms required by Western partners. Prime Minister Serhiy Korecki assessed that the payment of USD 29.5 billion in aid was at risk. The government wants to adopt the required regulations, including: taxes and fight against corruption, until October 15. Kiev is also in talks with European partners about accelerating payments planned for next year under the EU loan worth EUR 90 billion.
Next year will be slightly better
What to Watch
AI outlook — possibilities, not facts
The government will adopt regulations on taxes and corruption by October 15
Likely · Within days
Open Questions
- Will the parliament adopt the required reforms by October 15?
- Will European partners accelerate loan disbursement?
