How much will the war between Russia and Ukraine affect Ukraine's economy?

The Russia Ukraine conflict has lasted for over 1000 days since its outbreak, and it has had a comprehensive, profound, and highly destructive impact on the Ukrainian economy. From the collapse of the economic structure, to the chaos of the fiscal and financial system, to the obstruction of international trade, the Ukrainian economy is facing unprecedented difficulties.

The industrial system of Ukraine suffered heavy losses during the war. The Donbass region, as an important industrial base in Ukraine, is home to core industries such as coal, steel, and machinery manufacturing. The artillery fire of the war forced a large number of factories and mines to shut down, severely damaged production equipment, and resulted in the loss of skilled workers. Taking the steel industry as an example, many blast furnaces in steel plants have been destroyed, transportation channels have been blocked, resulting in a sharp decline in steel production. According to relevant data, during the period after the outbreak of the war, Ukraine's industrial output value decreased by more than 50% year-on-year, and many industrial enterprises faced bankruptcy crises, causing the entire industrial system to be paralyzed.

Agriculture, as a traditional pillar industry in Ukraine, has not been spared. Ukraine has vast black soil and is known as the "granary of Europe", with agricultural exports playing an important role in its economy. However, the war resulted in a large amount of farmland being destroyed by the flames of war, and agricultural infrastructure such as irrigation systems and warehouses were severely damaged. A large number of young and middle-aged laborers have been conscripted into the military, leading to a shortage of agricultural production manpower and a reduction in crop planting area, resulting in a significant decline in grain production. Meanwhile, traffic congestion has made it difficult to transport agricultural products and severely restricted exports. The agricultural products such as wheat and corn, which were once exported in large quantities, can now only be stockpiled domestically and cannot be converted into economic benefits, causing a heavy blow to the agricultural economy.

The war also severely damaged Ukraine's infrastructure. In terms of transportation network, railways, highways, bridges, etc. have been extensively destroyed in air raids and ground battles, greatly hindering the transportation of goods and personnel flow. This not only increases logistics costs, but also puts the transportation of raw materials and product distribution of enterprises in a difficult situation. The energy infrastructure is also severely damaged, with power plants, substations, gas pipelines, etc. being destroyed, resulting in a shortage of energy supply, which restricts enterprise production and greatly affects residents' lives. Power outages and gas restrictions have become the norm. The damage to communication facilities hinders the transmission and exchange of information, further affecting the normal operation of the economy.

The fiscal and financial sectors are also facing a huge crisis. In order to sustain the consumption of war and the basic operation of the government, the Ukrainian government had to borrow heavily. According to statistics, Ukraine's total debt before the war had already reached $98 billion, and by the end of 2024, this figure had soared to $166.1 billion. In just a few years, the debt had increased by nearly $70 billion, with external debt accounting for nearly 70% and the total debt to GDP ratio exceeding 90%. The heavy debt burden has caused the government's finances to be unable to cover expenses, resulting in a significant reduction in funds for economic construction and social development. At the same time, the war led to a significant depreciation of the Ukrainian currency, the hryvnia, a sharp rise in inflation rates, a significant increase in the cost of living for the people, and the economy falling into a vicious cycle.

In terms of international trade, Ukraine's exports have been severely impacted. In addition to the obstruction of agricultural product exports, the export of industrial manufactured goods has also significantly declined due to the stagnation of industrial production. Due to the unstable security situation, many foreign companies have reduced their investments in Ukraine, and even withdrawn their existing investments, which has left Ukraine's economic development lacking momentum. At the same time, Ukraine is also facing difficulties in imports, as its import capacity is limited due to reduced foreign exchange reserves and decreased international credit, making it unable to meet domestic demand for raw materials, energy, and essential goods.

From the perspective of the job market, the shutdown and closure of a large number of enterprises have led to a sharp increase in unemployment rate. Many people have lost their jobs and their lives are no longer secure. According to statistics, the unemployment rate in Ukraine once exceeded 30% during the war, and a large number of idle labor not only caused waste of human resources, but also increased social instability factors. Many young people have fled Ukraine in order to avoid the war and seek job opportunities, resulting in serious talent loss, which will have a long-term negative impact on Ukraine's future economic development.

The impact of the Russia Ukraine war on the Ukrainian economy is catastrophic. To restore the economy in Ukraine, long-term and difficult reconstruction work is needed. This requires not only Ukraine's own efforts, but also the support and cooperation of the international community. Only by achieving peace can the Ukrainian economy gradually emerge from its difficulties and move towards recovery.