Economic growth in most oblasts has reached pre-war levels or even passed them. What prospects does Ukraine face now?
As election fever goes into full swing and politicians stoke the fears of ordinary Ukrainians by talking about the supposedly “catastrophic” state of Ukraine’s economy, the reality is that most oblasts have already returned to pre-war levels of economic growth and some have even passed 2013-early 2014 indicators. What’s more economic growth is picking up pace across the board. In 2017, GDP grew by 2.6% in Ukraine, while in QI’18 it was up to 3.1%, and up again to 3.6% in QII. Still, the situation on world markets is poised to hit Ukraine’s weak spots hard in the not-too-distant future, so the pace the country needs to reach for long-term, sustainable growth requires a cardinal change to its economic policies.
An expanding growth zone
According to Derzhstat, the statistics agency, 2017 GDP was about 11.6% below 2013 levels. Once occupied Donetsk and Luhansk Oblasts are taken out of the calculation, however, GDP was only about 2% below 2013 levels, which reflects the pace of population drop-off in the rest of Ukraine over the last four years. Once growth is broken down by oblast, this improvement becomes even more distinct.
Compared to pre-war 2013, the growth leaders continue to be two neighbors in Right Bank Ukraine, Vinnytsia and Zhytomyr Oblasts, which recorded per capita GRP in 2017 that was 10.5% and 11.8% higher than in 2013. Indeed, Zhytomyr outstripped Vinnytsia last year. Meanwhile, Khmelnytsk Oblast has been quickly catching up to them, with GRP 6.5% up from 2013 and 9.0% up from 2016; Odesa Oblast posted 7.1% over 2013 and 6.6% over 2016; and Volyn Oblast posed 8.6% over 2013 and 3.3% over 2016. Even Ternopil Oblast posted 3.7% over 2013 last year and was 3.6% up from 2016.
In this way, three oblasts that posted significantly higher growth in 2016-2017 than they had in 2013 were joined by three that now effectively establish a solid band from Odesa’s Black Sea shoreline to the Volyn border with Poland—if it weren’t for Rivne Oblast. To the east of this strip, two nascent “horns” are formed by two oblasts each that extend the positive trend, albeit not so substantially, as they, too, passed 2013 per capita GRP growth in 2017. Going to the northeast are Sumy Oblast with 1.2% and Chernihiv with +0.7%, while going to the south are Kherson with +1.4% and Zaporizhzhia with +0.5%.
These horns of improvement to the east are separated from the six boomers by four oblasts that are still moving towards recovery: Kyiv, Cherkasy, Kirovohrad and Mykolayiv. Their per capita GRP was only 1.2-1.8% short of 2013 results. Given that average annual growth today is 3.4% since the beginning of 2018, these oblasts will probably also reach recovery levels and join the Right Bank body to its four-Left Bank oblast “horns.”
At this point, we’re looking at 14 out of 25 regions of free Ukraine in which economic growth has reached or substantially surpassed pre-war indicators. These 14 neighbor on three more regions—the city of Kyiv, and Lviv and Ivano-Frankivsk Oblasts—where the latest figures show that their GRP was around 3% lower in 2017 than prior to Russia’s invasion. If economic growth keeps pace at 3.5-3.6% this year, these three regions could also recover to 2013 levels, especially since Kyiv, at 7.4%, and Ivano-Frankivsk Oblast, at 6.3%, were among the growth leaders in 2017.
Mixed news elsewhere
The three remaining western oblasts—Chernivtsi, Zakarpattia and Rivne—are, for now in far worse shape than five years ago. The level of decline there is comparable to the three oblasts closest to the war zone in Donbas: Kharkiv, Poltava and Dnipropetrovsk. So far, none of these six appear close to recovering.
Moreover, a higher pace among the oblasts in the growth belt centered on Right Bank Ukraine has not led to growing wealth or a higher economic level already today. Mostly these oblasts are closing the gap with the previously successful oblasts. Indeed, varying degrees of growth and dynamics don’t always convert directly into higher incomes for residents of these regions. A comparison of average salaries in euro terms for May 2014 and May 2018 shows that nationally they are 44% higher (see Change in Average Salaries). Even taking inflation into account, most regions have already seen this indicator restored to early 2014 levels.
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