Denis Sjmygal. Foto: Den ukrainske regering - kmu.gov.ua

Only a new and powerful wave of the virus can change that, explains Ukrainian Prime Minister Denys Shmyhal. 

According to the National Bank of Ukraine, the Ukrainian GDP fell by around four percent in 2020 due to the pandemic. In contrast, the Ukrainian economy has been recovering this year, where Ukrainian Prime Minister Denys Shmyhal expects GDP to grow by four percent. 

“The only thing that can interfere with this scenario is another powerful wave of coronavirus, due to additional quarantine restrictions,” he wrote on Facebook

He stated that the growth in GDP came from a growing consumer demand of about 13 percent in 2021 and an increasing average salary now reaching $500 per month. He also pointed out that foreign direct investments in Ukraine have regained strength and that the agricultural sector is growing, which is increasing exports. 

“Record harvest and investment of previous periods give results. The growth of the agricultural sector this year has already reached 8,4 percent. Moreover, over the last 1,5, Ukrainian small and medium farms have received almost UAH 30 billion of affordable and cheap loans, which also gave an additional effect in this growth,” Shmyhal wrote. 

Was struck by Covid

Shmyhal also wrote that the Ukrainian construction sector has increased by two percent over the last eight months. In addition, critical industries such as machinery, metallurgy, and the chemical industry have increased by seven percent this year. 

The positive news comes after 2020, where the Ukrainian economy was heavenly affected by the pandemic. In a report, OECD wrote that the Ukrainian GDP fell by around four percent in 2020, while the economy, before the pandemic, was expected to grow by 3.5 percent. The decline was mainly due to the harsh lockdowns and world demands. 

Consumer confidence fell from 92.2 percent in December 2019 to 60.7 percent last year and foreign trade turnover fell by 7.5 percent. As a result, Ukraine had a net outflow of foreign direct investments of $868.2 million in 2020. 

Inflation is threatening everything

While the Ukrainian GDP seems to be growing, inflation is also on the rise. Open4business writes how consumer prices accelerated to 11 percent in September from 10.2 in August. In September, prices for food and non-alcoholic beverages grew by 1.1 percent. 

The National Bank of Ukraine wants to bring down inflation to five percent and recently adjusted the central interest rate, but it is still only 8.5 percent. In June, Kristian Andersson, Director of the Swedish bank SEB, told Ukrainenu that the National Bank of Ukraine would need to increase the central interest rate even more to keep up with and fight inflation. 

“I think that the central interest rate is too low if they want to keep inflation down,” says Andersson, “They have to raise the central interest rate, but I am not sure that they will do that, because the President last year said that the interest rate is too high and that it needs to stay low so that it will remain cheap to borrow money.”

Ukraine’s inflation level over the years:


Statistic: Ukraine: Inflation rate from 1996 to 2026 (change compared to previous year) | Statista

A new quarantine will be expensive

The number of Covid-19 cases is spiking in Ukraine these days, and a new lockdown is looming. The Governor of the National Bank of Ukraine, NBU, Kyrylo Shevchenko, recently warned that it would be costly for Ukraine to introduce a new lockdown. 

“Although business processes are returning offline and vaccination rates are growing, the risks of introducing a new lockdown due to the spread of new strains of the virus remain significant. The assessment of the impact on GDP will depend on the format of quarantine restrictions. Depending on the severity of the possible measures, losses may be from 0.4% to 0.6%,” Shevchenko said and added that vaccinations would remain one of the ways that Ukraine can avoid a new lockdown. Still, vaccination rates in Ukraine are under 20 percent.

In a survey in April, the Kyiv International Institute of Sociology found that 52.2 percent of Ukrainians aren’t interested in being vaccinated, according to Euronews. The distrust in vaccines is a big problem for Ukraine, which is trying to reach herd immunity.