Ukraine’s Wartime Economy: Resilience in the Face of Conflict
- Matthew Parish
- May 11
- 7 min read
More than two years into a full-scale invasion by one of the world’s largest military powers, Ukraine’s economy—while battered—is far from broken. From the outside, it is easy to assume that a nation at war, whose cities have suffered aerial bombardment and whose infrastructure has been targeted systematically, would collapse into chaos and economic paralysis. Yet across Ukraine, supermarkets are well-stocked, public transport continues to run and factories and farms have resumed production even under the threat of missile strikes. Here we explore the remarkable resilience, adaptation, and international support that have underpinned Ukraine’s economic survival, while also addressing the structural vulnerabilities, such as unemployment and income insecurity, that continue to challenge the country’s long-term economic health.
Resilience: An Economy That Refused to Collapse
At the onset of Russia’s full-scale invasion in February 2022, Ukraine’s economy suffered a staggering blow. GDP contracted by nearly 30% in 2022, according to the National Bank of Ukraine (NBU). Exports were crippled, particularly from the Black Sea ports; key industrial centres like Mariupol and Severodonetsk fell under occupation; and millions of Ukrainians were internally displaced or forced abroad.
Yet despite this initial economic trauma, Ukraine did not experience systemic collapse. By late 2023, GDP had returned to modest growth, with the NBU estimating around 5% recovery, driven by agricultural exports, reconstruction activity, and internal consumption. Ukrainian economic resilience has taken several forms:
Functional logistics and retail sectors: Even under bombardment, major retailers like ATB, Silpo, and Epicentr maintained supply chains and reopened stores swiftly. Cities like Kharkiv and Mykolaiv, which faced direct shelling, now report near-normal access to food, medicine, and consumer goods.
Stable financial system: The NBU’s early moves to fix the exchange rate, impose capital controls, and ensure banking liquidity prevented a currency collapse. Ukrainian banks, backed by a resilient digital infrastructure, continued operating even in conflict zones, aided by services like Diia, the e-governance platform that maintained documentation and welfare access.
Agricultural endurance: Ukraine’s farmers, even under the shadow of air strikes and mined fields, have succeeded in planting and harvesting millions of hectares. The partial reopening of Black Sea grain corridors and overland logistics via the EU has helped to move commodities and sustain rural economies.
Adaptation: Wartime Innovation Across Sectors
One of the striking features of Ukraine’s wartime economy has been its capacity for adaptation. Enterprises large and small have retooled for war, relocated to safer regions, or pivoted to meet new domestic needs.
Industrial relocation and retooling: As eastern regions close to the front line became unviable, thousands of businesses moved westward. The government’s Relocation Programme facilitated these transfers, particularly to Zakarpattia, Lviv, and Ivano-Frankivsk Oblasts in the west of the country. In many cases, factories resumed work within weeks of resettling.
Defence sector growth: Ukrainian arms production has dramatically increased. Companies like Ukroboronprom and private firms such as Practika and Aerorozvidka have expanded manufacturing of drones, armoured vehicles and ammunition. Domestic drone production in particular has surged, with thousands of small tech startups contributing to military innovation.
Digital transformation: The Diia app not only supports public services, but also welfare delivery, ID verification and tax filing, enabling the state to function digitally in a fragmented geography. Fintech and e-commerce have flourished even amidst war, in part due to Ukraine’s pre-existing IT sector strength.
This entrepreneurial flexibility is reminiscent of Austrian economist Joseph Schumpeter’s idea of “creative destruction,” in which crisis catalyses new forms of productivity and organisation. Ukrainian resilience is not just reactive—it is proactive and creative, building a wartime economy capable of future reconstruction.
International Support: The Lifeline of Macroeconomic Stability
Ukraine’s economic continuity would not be possible without massive and sustained international support. This support has taken multiple forms:
Direct budgetary aid: The United States, European Union, and other partners provided over $45 billion in direct fiscal assistance from 2022–2024. These funds help Ukraine cover public sector salaries, pensions, and emergency expenditures without printing money or triggering hyperinflation through borrowing on the international markets.
IMF and World Bank packages: In 2023, Ukraine secured a four-year IMF Extended Fund Facility worth $15.6 billion, contingent on reform milestones. The World Bank has coordinated disbursements for social protection, reconstruction, and institutional reforms.
Trade liberalisation: The EU suspended tariffs on Ukrainian exports and expanded road, rail, and port logistics under the Solidarity Lanes initiative. This opened new markets and routes to replace those lost to Russian aggression.
Private investment in critical infrastructure: While foreign direct investment has dropped overall, targeted private capital is returning to areas like energy grid repair, cybersecurity and agro-logistics, often backed by risk insurance from multilateral banks.
International support is the scaffolding that holds up Ukraine’s public sector and stabilises her macroeconomy. Yet it also raises the challenge of donor dependency and the risk of economic vulnerability if aid falters in the long term.
Structural Imbalances: Unemployment, Low Wages, and Labor Flight
While the broader macroeconomic picture shows resilience, the reality on the ground for many Ukrainians remains economically precarious.
Unemployment: The war displaced businesses and workers on a vast scale. In 2023 official unemployment hovered at around 20%, with far higher rates in frontline regions. The informal sector absorbed some of this labour, but underemployment is rife.
Low wages and cost-of-living pressure: Public sector salaries, though paid, have stagnated, while prices—especially for energy, imported goods, and housing in safer regions—have risen. Many internally displaced people (IDPs) survive on modest stipends and casual labour.
Brain drain and labour flight: Millions of Ukrainians, particularly skilled professionals and young workers, remain abroad. The long-term demographic toll—particularly the loss of labour in education, healthcare and IT—will haunt the postwar recovery if not reversed through incentives for refugees to return and reintegration strategies.
These challenges are exacerbated by psychological strain and social fragmentation, raising the spectre of what development economists call dual economies: where parts of the economy function well (e.g., defence technology, agriculture), while others—especially welfare and services—lag or degrade.
Conclusion: An Economy in Defiance of Defeat
Ukraine’s wartime economy is a story of paradoxes: devastation and growth, innovation and scarcity, international dependence and domestic ingenuity. Shops remain stocked and cities function not because the war is absent, but because Ukrainian society—government, business, and civil society—has found a way to endure it.
The war has forced Ukraine to rewire its economy for survival, resilience and wartime productivity. But as impressive as this is, it has come at a high cost. Unemployment, wage stagnation and demographic displacement cannot be ignored. Victory on the battlefield must ultimately be matched by a sustainable and inclusive peacetime economy that rebuilds what has been lost and restores opportunity to all Ukrainians.
The full story of Ukraine’s economic war effort is not just one of defence—it is one of determination to live fully and freely, even amid war.
---
Ukraine’s Macroeconomic Overview: 2021–2025
Real GDP Growth (Annual % Change)
Year | Real GDP Growth (%) | Commentary |
2021 | +3.4% | Post-COVID recovery; stable domestic demand and growing exports. |
2022 | –28.8% | Sharp collapse due to Russia’s full-scale invasion: destroyed infrastructure, mass displacement, halted investment. |
2023 | +5.3% | Partial rebound, driven by a resilient agricultural sector, reopened trade corridors and foreign aid inflows. |
2024 | +2.9% | Modest growth despite infrastructure and energy constraints; donor support and reconstruction aid play a role. |
2025 (proj.) | +2.0% | Growth remains constrained by labour shortages, ongoing military operations, and investor caution. |
Inflation Rate (Year-End, %)
Year | Inflation Rate (%) | Commentary |
2021 | 10.0% | Driven by global commodity price volatility and domestic wage increases. |
2022 | 20.1% | Wartime disruptions to supply chains, currency instability and food price spikes. |
2023 | 5.9% | Improved monetary stability; inflation moderated due to price controls and stabilised logistics. |
2024 | 9.7% | Inflation pressures return due to energy shortages and budget deficit monetisation. |
2025 (proj.) | 6.9% | Expected gradual decline with restored supply chains and tighter monetary policy. |
Unemployment Rate (% of Labor Force)
Year | Unemployment (%) | Commentary |
2021 | 10.5% | Moderate unemployment reflecting long-term structural issues. |
2022 | ~20.0% | Job losses from displacement, business closures and occupation of territories. |
2023 | ~18.0% | Some recovery, especially in construction and logistics; informal economy plays a larger role. |
2024 | ~14.0% | Continuing improvement, although regional disparities remain significant. |
2025 (proj.) | ~12.0% | Gradual normalisation expected, but challenges persist in eastern and southern regions. |
Government Budget Deficit (% of GDP)
Year | Budget Deficit (%) | Commentary |
2021 | –3.5% | Stable fiscal management with external financing manageable. |
2022 | –17.0% | Massive wartime spending, collapse in tax revenues and reliance on emergency foreign grants and loans. |
2023 | –20.6% | Continued high deficit due to defence, pensions and IDP support. |
2024 | –20.6% | Budget strain persists despite some revenue gains; donor funding remains critical. |
2025 (proj.) | –18.2% | Slight improvement with reconstruction efforts boosting employment and tax collection. |
Summary Observations
Resilience and Adaptation: Despite the devastating shock of 2022, Ukraine’s economy has shown an extraordinary ability to adapt—maintaining functional markets, reopening exports via the Danube and land corridors, and leveraging digital services.
Macroeconomic Management: The National Bank of Ukraine has played a key role in stabilising the currency and managing inflation, even under martial law.
Challenges Ahead:
Sustained budget deficits due to war costs and reliance on foreign assistance.
Regional economic fragmentation, especially in occupied or contested areas.
Labour market dislocations from migration, military service, and destruction of workplaces.
Opportunities:
International aid and eventual reconstruction funding (e.g. EU accession framework).
Agricultural resilience, particularly in central and western Ukraine.
Digital and fintech innovation, with a growing IT sector despite the war.
Reading List: Ukraine’s Wartime Economy
General Overviews and Data-Driven Analyses
Centre for Economic Strategy – Ukraine’s Economy During the War
https://ces.org.ua/en/tracker-economy-during-the-war
Continuously updated data dashboard with GDP, inflation, unemployment and export/import data.
National Bank of Ukraine – Inflation Reports
Detailed quarterly reports analysing inflationary pressures, monetary policy and projections.
World Bank – Ukraine Economic Update (various years)
https://www.worldbank.org/en/country/ukraine
Authoritative macroeconomic assessments, growth forecasts and sectoral analysis.
IMF Country Reports on Ukraine
https://www.imf.org/en/Countries/UKR
Includes reviews of macroeconomic stabilisation, foreign aid and fiscal policy conditions.
Resilience, Reconstruction, and Economic Policy
CEPR / VoxEU – The Economics of the War in Ukraine
Edited by Yuriy Gorodnichenko et al.
https://voxeu.org/article/economics-war-ukraine
A collection of essays from top economists analysing how Ukraine has kept functioning economically.
Bruegel – Ukraine’s Post-War Recovery: Policies for Resilience
Explores fiscal policy, investment climate, and institutional reforms needed for long-term recovery.
Atlantic Council – Ukraine’s Economic Resilience Amidst War
https://www.atlanticcouncil.org
Covers public finance, aid coordination, and the role of state enterprises in the war economy.
International Aid, Trade and Integration
European Commission – EU Solidarity with Ukraine
Details on financial support packages, trade liberalisation and long-term accession processes.
USAID and EBRD Reports on Ukraine’s Business Sector
https://www.ebrd.com/what-we-do/economic-research-and-data.html
Focuses on SME support, agriculture, logistics and digital resilience.
Sector-Specific Studies
UNDP – Ukraine Rapid Damage and Needs Assessment (2022–2024)
Breakdown of damage and recovery needs across infrastructure, housing, and public services.
KSE Institute (Kyiv School of Economics) – Business Activity Reports
Frequent surveys on business expectations, industrial output and supply chain disruptions.
Chatham House – Ukraine’s Energy Security and Wartime Adaptation
In-depth analysis of how Ukraine has sustained its energy system under attack.
Recommended Books
Timothy Ash (ed.) – Rebuilding Ukraine: Principles and Policies
Forthcoming from CEPR Press – Comprehensive roadmap for economic and institutional rebuilding.
Yuriy Gorodnichenko, Ilona Sologoub – Economics in the Time of War
An accessible yet rigorous volume on policy choices Ukraine has made during wartime.
