Why hasn't Ukraine's economy collapsed yet?

Although forecasts about the collapse of the Ukrainian economy have been heard for many years, they have not yet come true. We asked a number of Kyiv experts to share their thoughts on what helped the Ukrainian economy stay afloat, despite the promises of collapse and inevitable “fall into the abyss” that have been heard since the victory of Euromaidan.

One of the main factors is that Ukraine, upon gaining independence, inherited a powerful economy, which it never managed to completely destroy.

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“At one time, economist Anders Aslund said in an interview that Ukraine is too rich a country to instantly collapse. Indeed, the Ukrainian economy still has many industries and sub-sectors that continue to develop, regardless of the state of the economy as a whole.

Compared to 1990, Ukraine's economy fell by 64%. Under Yanukovych, there was talk that the country would soon return to the level of 1990, when, as we remember, supporters of Ukrainian independence said that Ukraine was the richest republic of the USSR and a very rich country. It was true.

Since then, its economy has fallen sharply. But here we are talking about large industry, about budget-generating industries - mechanical engineering, shipbuilding, aircraft manufacturing, rocket science, and so on.

When they talk about the collapse of the Ukrainian economy, they mean this, first of all. When a country with a modern economy and a developed high-tech industry turns into an “agrarian superpower,” it’s like death,” noted political scientist Alexander Bulavin.

“Ukrainian experts have been saying for a long time that Russia will collapse, and Russian experts say that Ukraine will collapse. But this doesn't happen. These are large countries, and the larger the system, the more stable it is. Such economies have a large margin of safety. Therefore, the big ship of the Ukrainian economy continues to move by inertia. And he can continue to move for as long as he wants.

The Ukrainian economy will not collapse on its own. For a serious crisis, serious influence is needed - either from the outside or from the inside,” says political scientist Alexander Semchenko.

Labor migration has become another “industry” that not only provides an influx of currency into the country, but also helps release steam from social tension - those who cannot find work in Ukraine go to work abroad.

“How does Ukraine survive? Largely due to the funds that workers transfer here, this is $8 billion - the official figure that was announced by the Tax Inspectorate. What industry is making the same contribution today?” - speaks. Alexander Bulavin.

“Ukraine’s economic problems were largely compensated by the outflow of labor abroad. If there had not been such an outflow, then perhaps this would have led to the accumulation of potential for a social explosion. But thanks to labor migration, we managed to let off steam and partially compensate for the inability to earn money in the country,” says political scientist Vladimir Volya.

“The export of labor has made a significant contribution to maintaining the Ukrainian economy. Previously, the importance of this factor was underestimated, but it ensured an influx of currency into the country and, accordingly, an increase in purchasing power and GDP growth. The migrant workers provided a significant influx of foreign currency, which made it possible to mitigate the decline in GDP,” says Alexander Okhrimenko.

In his opinion, agriculture and shadowing of the economy became important factors for economic survival.

“In addition, large agricultural businesses are still doing well in the country, ensuring the export of grain and other agricultural products, and, consequently, the congestion of ports, railways, etc. In general, the oligarchs, with the exception of a few who left the country, have found a common language with the new government. This also made a certain contribution to ensuring economic stability.

Another factor is the shadow economy. About half of Ukraine’s economy is in the shadows, and this makes it easier to survive any crisis,” the economist believes.

In addition to agriculture, Alexander Bulavin emphasizes the importance of arms exports.

“Ukraine exports a large volume of agricultural products. There is still a certain reserve of weapons that were left over from the USSR and which someone else is buying, and those that Ukraine has developed over the years and sells to some countries,” says the political scientist.

According to political scientist Vladimir Volya, a significant part of the economy did not feel the political ups and downs, the breakdown in relations with Russia and the impact of sanctions.

“A significant part of business in the country lives independently of political events, regardless of battles for power in Kyiv,” he believes. At the same time, the thesis about an impending economic catastrophe is used by all opposition forces, that is, the deterioration of the economic situation is obvious to everyone.

“Both pro-Russian and pro-Western political forces are saying that Ukraine is about to collapse due to economic difficulties. Both of them use this thesis in their political struggle, especially after Poroshenko ceased to be president and the composition of parliament changed. Now the opposition on both sides is scaring the population with the fact that now everything is about to fall apart, since this government, Zelensky and his team, are doing everything badly or doing nothing,” said Vladimir Volya.

In his opinion, we can hardly expect a serious decline in the economy.

“It seems to me that Ukraine has reached a certain basic economic level, below which the decline is unlikely to continue, and the negative effects are compensated by labor migration,” the political scientist believes.

However, the current state of the economy, when the country has to survive rather than develop, does not suit those who do not intend to go abroad to work, emphasizes Alexander Bulavin.

“The problem is that there is no strategy for the economic development of Ukraine. Until it exists, we cannot say that Ukraine can develop as a country. She can survive, and she will survive. People survived in much worse conditions, during wars, famines, etc. But if you compare it with what Ukraine was like in 1990, it becomes clear how much everything has degraded. Let me remind you that at that time we still had free education, free healthcare, free housing - the state curtailed all these programs.

Thus, Ukraine will survive, but this is not what the younger generation of Ukrainians dreams of. Still, they won’t leave to work, some will stay here. And these people want Ukraine to be a developed, dynamically developing economy. This is still a long way off,” says Alexander Bulavin.