Ukraine benefited from a sharp increase in the prices of its main export products, including grain and iron, according to a report by French credit insurer Coface.
Russia militarily invaded Ukraine this Thursday, which led to a wide series of sanctions and questions from third countries.
Already in the Coface report, issued prior to this invasion, it is described that relations between Russia and Ukraine continued to be difficult.
In November 2021, reports and satellite images of Russian troop movements towards the border raised fresh concerns about Russia’s intentions following a similar troop buildup in April.
Furthermore, if the Nord Steam 2 starts operating, Ukraine could lose a part of its gas transit revenue from Russia.
In 2021, Ukraine’s economic recovery was supported by an increase in household consumption and investments; however, much of the growth was due to a favorable base effect and the pre-pandemic level was not reached.
Export
Higher export volumes from Ukraine, thanks to strong harvests, should still contribute to the first months of 2022.
For Coface, household consumption (74% of GDP) will continue to be an engine of growth, with inflation slowing due to higher base effects and price stabilization of the higher ones.
Meanwhile, rising food and energy prices caused inflation to accelerate in Ukraine to 11% in September 2021, prompting several interest rate hikes by the National Bank of Ukraine (reaching 8.5% in November 2021).
On the other hand, the Covid-19 pandemic still poses a risk to the recovery process.
The number of cases and hospitalizations have increased amid the slow vaccination process in the fall of 2021.
In fact, Ukraine has one of the lowest vaccination rates in Europe, with only 17.2% of the population fully vaccinated as of the end of October 2021, and high vaccination hesitancy.
At the same time, companies are aware that it could limit the recovery process.
According to the survey published in September 2021 by the American Chamber of Commerce and Citi Ukraine, 61% of the companies surveyed indicated the possibility of a new lockdown as their main concern.
