The following is the June 5, 2024 edition of our Ukraine Business Roundup weekly newsletter. To get the biggest news in business and tech from Ukraine directly in your inbox, subscribe here.
After just a day spent in Kyiv, one could be forgiven for thinking Ukraine’s economy is going strong. Restaurants are full, people stroll with shopping bags in tow, fancy cars line streets.
Living in Kyiv, I too am often overly optimistic about the state of affairs. That is, until recently when I had to wait seven minutes for the subway to come after having just missed the last train. (And now, of course, the frequent blackouts.)
Before the war, Kyiv residents could expect a train every two minutes during peak times, and on non-peak hours, around three to four minutes. A fellow passenger, apparently surprised by our seven-minute wait time, took a photo of the timer Kyiv metros have showing how much time has passed between trains.
Indeed, the city announced the intervals between trains would go up to three to four minutes at peak times and to around six minutes at non-peak times.
The reason? Mobilization is leading to personnel shortages (whether that’s because men are actually being mobilized, or they’re hiding from it and therefore avoiding official work) and migration abroad has dampened passenger flows, the city said.
I know what you’re thinking, “Complaining over having to wait seven minutes for the train?” (I lived in New York and was no stranger to waiting 20 minutes for the next train to arrive.)
But the anecdote is just one small example of the labor shortages touching every single part of Ukraine’s economy as a result of Russia’s war against the country. In fact, Ukraine’s labor market has contracted around 27% compared to pre-war levels, Bloomberg reported.
Meanwhile, some industries are witnessing big numbers of business closures. A report this past week by Ukrainian analytical firm YouControl found that 1,261 agricultural companies had closed from 2022 to the first quarter of 2024, representing the largest share of closures.
The share of law firms closing doubled, YouControl said. If in 2021, 2.3% of all business suspensions were represented by law firms, after the start of the full-scale invasion that number is now 4.7%. A lawyer told me last week that indeed, law firms have almost “no clients” right now.
Companies are hard-pressed to attract and retain talent amid the country’s mobilization drive and shortages. A group of defense companies recently sent a letter to the government demanding they ensure the new law around mobilization that recently came into effect does not hurt their ability to produce weapons.
All of this is pretty scary when you think of how much Ukraine needs a healthy tax base of people working in order to fund the government and of course, its military needs.
Not all is lost. Ukrainian businesses have remained resilient and GDP growth is still projected by the World Bank to be 3.2% in 2024 (although that is lower than last year's 4.8%).
Russia strikes again
Russia launched a widespread drone and missile attack on Ukraine overnight on June 1, damaging energy infrastructure all across the country.
What was hit and where? Ukraine’s Energy Ministry Herman Halushchenko said Russia hit energy infrastructure in Zaporizhzhia, Dnipropetrovsk, Donetsk, Kirovohrad, and Ivano-Frankivsk oblasts.
DTEK, Ukraine’s largest private energy company said two of its thermal power plants were targeted, resulting in "serious damage.” State-owned hydroelectric energy operator Ukrhydronergo said “critical damage” was inflicted on two of its power stations.
What’s Russia’s end game with these attacks? Russia is likely trying to inflict as much damage as possible now, disrupting lives and businesses, in the hopes Ukraine won’t be able to make necessary repairs before the next heating season.
Rolling blackouts have already been implemented across the country. Around most of Kyiv, it’s lights out at around 6 p.m. and the power doesn’t come back on till very late at night or the next morning.
Although many businesses have generators, it’s still disruptive to operations when the power goes out and backup has to be turned on. Kyiv’s streets are also buzzing with the loud sounds of generators everywhere.
Defense market players told Ekonomichna Pravda they aren’t too worried about blackouts as they’ve been able to adjust by buying generators and planning production around outages.
Nonetheless, the industry is energy-intensive, and buying the right type of generators — which aren’t cost-effective sources of energy to begin with, making production and product more expensive — will require significant investment for some companies. Any disruptions can lead to serious delays in production, the companies say.
Dollar exceeds 40 hryvnias
The Kyiv Independent has partnered with the Kyiv-based Center for Economic Strategy (CES) to bring you a monthly visual of what’s happening in Ukraine’s economy.
This month’s chart shows the average daily official and market exchange rates of the Ukrainian hryvnia against the dollar.
In May, the official dollar exchange rate exceeded 40 hryvnias (Hr) per dollar for the first time in history.
While the 40 hrynvia mark is perceived to be a worrying threshold, the weakening of the hryvnia is a small but useful help for the Ukrainian budget, CES economist Maksym Samoiliuk writes. The state will be able to raise a little more money through excise taxes and foreign financial assistance.
In such a difficult war-time environment, every little bit helps.
Check out the interactive chart here.
Who’s who
Ever wondered who Ukraine’s top employers are? The analytical service Opendatabot using data from the State Statistics Service has pulled the list together.
Who are they? The top three spots are taken by state railway carrier Ukrzaliznytsia with 187,620 employees, followed by grocery chain ATB, and state postal service Ukrposhta.
Those three are followed by grocery chain Silpo, state nuclear agency Energoatom, the country’s largest postal service Nova Poshta, gas production company UkrGasVydobuvannya, steel producer ArcelorMittal, aircraft engine manufacturer Motor Sich, and Roosh, a tech company.
Nine out of these 10 companies have seen their employee counts reduced over the last few years. Ukrposhta, Silpo, and Energoatom saw the largest decreases.
Ukrposhta, in response to Opendatabot, said the decrease “reflects several complex processes,” including migration trends associated with the war, changes in demand for certain types of services provided by the company, reorganization, digitalization, and automation.
More than half of the largest employers in Ukraine are registered in Kyiv Oblast.
In conversation with Ukrsibbank’s CEO
In a recent interview with the Kyiv Independent, we spoke to the CEO of Ukraine’s second-largest foreign-owned bank Ukrsibbank BNP Paribas bank, Laurent Dupuch about running a bank during war.
Dupuch told the Kyiv Independent that keeping the bank running after the start of the invasion “was not a stroke of luck, but a result of our concerted efforts to get even closer to our customers.”
The Kyiv Independent: How has the bank navigated these two years of full-scale war?
Laurent Dupuch: It's been a challenging time but also a time of remarkable progress. We took a moment to reflect and appreciate how the bank and our teams adapted and grew during this period.
The Kyiv Independent: What about international companies? How can they get involved in contributing to Ukraine?
Laurent Dupuch: This is where things get interesting. Ukraine will need a lot of support rebuilding after the war, and that's where international companies come in. We want to be a partner in the country's reconstruction efforts and are actively collaborating with various partners to secure financing for the country's rebuilding.
The Kyiv Independent: Since the war began, many of your employees have joined the armed forces. How have you supported them?
Laurent Dupuch: Yes, around 100 of our colleagues have mobilized. We pay their salaries, ensure they receive everything they need, and stay in touch with them. This connection is essential – they need to feel like part of the bank’s family.
Read the full interview here.
In other news
What if Putin wins? I had the chance to answer this question in an op-ed for the U.K.’s The Telegraph.
My thoughts? Giving up on Ukraine would be giving Russia a gift of epic proportions: a depopulated agricultural bastion replete with some of the world’s most coveted resources.
And with each delay in aid, each kilometer gained by Russia on the battlefield in its push westward, brings the Kremlin closer to that ultimate reward.
Read the piece here or listen to me talk about it on The Telegraph’s Ukraine: The Latest podcast.
What else is happening
Russia's full-scale invasion has destroyed at least 210,000 buildings in Ukraine, NYT analysis reveals
An examination of satellite data reveals the destruction includes 106 hospitals, 109 churches, temples, mosques and monasteries and 708 schools, colleges and universities. "The scale is hard to comprehend," the NYT writes in its interactive report. "More buildings have been destroyed in Ukraine than if every building in Manhattan were to be leveled four times over."
Polish farmers resumed blockade at a Ukrainian border crossing, Border Guard Service says
Polish protesters have resumed their blockade at the Rava-Ruska-Hrebenne border crossing due to Ukrainian agricultural imports, Ukraine's Border Guard Service said on June 4. "Representatives of Polish farmers demand reduced imports of Ukrainian crops to Polish territory from Ukraine," the Border Guard Service said on Telegram.
Kharkiv printing house hit by Russian missile will take 4-5 months to restore, company says
"The necessary equipment takes months to produce. I don't know yet if we will succeed, but now we can say with certainty that in the best-case scenario, it will take four months to restore everything,” the Faktor-Druk printing house’s President Serhiy Polituchy said in Kyiv on May 31. Meanwhile, the Howard G. Buffett Foundation said on May 31 that it would finance the restoration of the printing house. The Faktor group of companies includes publishing house Vivat — Ukraine’s third-largest book publisher.
Ukraine to receive $2.2 billion from IMF's Extended Fund Facility
Ukraine is set to receive $2.2 billion from the IMF's Extended Fund Facility (EFF), Prime Minister Denys Shmyhal announced on social media on May 31. The funding announcement comes as Ukrainian and International Monetary Fund officials reached an agreement on the fourth review of the EFF Arrangement, according to Shmyhal.
Ukraine to receive first tranche of frozen Russian assets revenue this summer, EU official says
"We are talking about summer. I would not like to promise when exactly the money will be transferred to the account, but decisions will be made in the next few weeks, and the payment will be made later," EU Sanctions Envoy David O'Sullivan said on May 31. According to O'Sullivan, the legal framework within which the funds will be transferred is still in progress. The EU sanctions envoy hopes that the decision will be made in "a few weeks."
