Bruegel - Ukrainian Economy, July 2023

This report analyzes the impact of the ongoing conflict in Ukraine on the country's economy and management. The conflict has caused enormous human and material losses, turning back Ukraine in its socio-economic development by several decades. Despite the challenges brought about by the war, there have been positive developments in the economy, including stabilizing the exchange rate and budget, resuming exports and imports, and fixing damage to critical infrastructure. The Ukrainian government has had to adapt its management system to the realities of martial law, combining command management with flexibility, allowing market adaptation and allocation mechanisms to work relatively smoothly and leaving sufficient room for local initiatives. Foreign financial aid has been critical for basic macroeconomic stability and sustainability, and the Ukrainian authorities must continue to refine and improve their war economic management. The report also discusses the slow implementation of recommendations for reform and the need for continued governance reforms. The authors recommend that the Ukrainian authorities refine and improve their war economic management, abstaining from administrative and command methods whenever possible, simplifying regulatory procedures, tax and customs administration, returning to competitive public procurement, and continuing market reforms and privatization in cases that do not harm defense efforts. The report concludes that as long as the war continues, prolonging large-scale, regular and predictable financial aid to Ukraine will be critical for basic macroeconomic stability and sustainability and for delivery of essential public goods by the Ukrainian authorities.