What Are Some Bright Spots in Ukraine's Economic Landscape?

March 30, 2023
UkraineWorld spoke to Vitaliy Kravchuk, an expert at the Institute for Economic Research and Policy Consulting.

Key points - in our brief, #UkraineWorldAnalysis:

1. On the strengthening hryvnia

The hryvnia has strengthened at cash currency exchanges. There is the maturing of forex-denominated bank savings bonds bought at the non-cash rate and a likely decrease in devaluation/inflationary expectations.

2. On factors contributing to improved GDP forecasts

This year, Ukraine's economic situation is somewhat more stable and predictable, and part of the country's damaged infrastructure has been restored. However, with a forecasted growth of less than 2% in conditions of high uncertainty, this is within the margin of error.

3. On whether the EU can completely "ban" the Russian banking system

Firstly, there is unsanctioned trade for which overpayments must be made. Secondly, the unhindered export of Russian food products is guaranteed by the EU as part of the grain deal. With Iraq, for example, there was a precedent of bartering food for oil, but it is clear that the scale is different when it comes to Russia.

4. On reparations for Ukraine after the war

Reparations involve compensation by a country that loses war for damages caused by its aggression. Therefore, the damage Ukraine has sustained needs to be documented. Moreover, freezing Russian assets and making use of them are two very different matters. While Russian assets in Europe and abroad have been frozen by sanctions, there is a great deal more work to do to liquidate them and direct them to Ukraine's recovery.

5. On oil purchase caps and next steps

Technically, the oil price cap prohibits EU and G7 companies from handling Russian oil cargoes above a maximum designated. There is potential for alternative suppliers and circumvention through the use of companies outside of sanctioned countries. Russia has made adaptations. The further effectiveness of sanctions on Russian oil will depend on the fight against efforts to circumvent the ban on the export of "Western" technologies.

Vitaliy Kravchuk, an expert at the Institute for Economic Research and Policy Consulting

This material was prepared with financial support from the International Renaissance Foundation.