Ukraine-2023: Victory and preparation for Ukraine recovery

2022 was a great challenge for Ukraine and the entire civilized world, but our country was able not only to hold on, but with the help of our allies began to defeat the terrible Russian invasion.

It quickly became clear that the home front and the economy are no less important than the battlefield, and it is necessary to think about the Ukraine recovery not after the war, but right now, because in addition to the most devastating war since the Second World War, Ukraine has also received an unprecedented window of opportunity for further integration into the Western world.

We would like to share our vision for 2023 and tell you a little about our plans in the face of the uncertainty we have all been living in since February 2022.

Let's start with an optimistic view: 2023 is the year of Ukrainian Victory. We are absolutely sure as, fortunately, almost the entire Western world with its resources, technologies and capabilities is on Ukrainian side, and our army is one of the best in the world.

Yes, we do not yet know what our victory will look like (except for the condition of returning all our territories): it is quite possible that for some period we will have to live next to the enemy, as Israel has been doing for many decades. Once in 2016, a BDO partner in Israel told me that we will get used to this situation someday, and the constant threat did not prevent Israel from becoming successful, and therefore it will not prevent Ukraine. At that time I agreed with that statement, but only now I can say that I really understand it.

The second good news is that our economy impresses with its adaptability. The most pessimistic forecasts of the beginning of the war did not come true: Ukraine lost about a third of its GDP, but not half (or even 60%, as some experts believed). 2023 is unlikely to show explosive growth: according to various estimates, our economy may show either a slight decline (up to 5%) or a slight increase (by 3-5%), as there are too many uncertainties ahead.

Businesses are trying to find opportunities to continue working: those who need constant power supply are buying generators and batteries (which in December became the second import item after fuel), those who lack the domestic market start exporting their goods and services or try to find new products for new consumers. On the other hand, we remember how fast the catastrophic situation with fuel supplies was resolved (in a few months), and Starlink will soon depend on Ukrainian consumers, not vice versa.

The price increase remains controlled despite the bounded emission: CPI of 26-28% in 2022 is approximately at the level of 2014 (and significantly less than in 2015, when prices rose by more than 43%). Moreover, a significant increase in prices in 2022 is not a purely Ukrainian problem, all our western neighbors are showing record inflation: Hungary and the Baltic States - more than 20%; Bulgaria, the Czech Republic and Poland - about 15% (and all these - in the absence of war, but rather as a result of significant injections of funds during the fight against COVID-19). There are reasons to believe that this year inflation will be lower, but still clearly above 10%.

The situation with the currency is somewhat similar: the official hryvnia exchange rate against the US dollar has fallen by 20% since February 23 (cash - by 25-30%), but due to the strengthening of the dollar at its peak, the euro lost about 15% of its value, and the Polish zloty - up to 20% against the US dollar (although both currencies have now partially recovered the fall)

An interesting observation: many interlocutors, when you remind them of the crisis in Ukraine in 2014-2015, generally say that it was not as bad then as now. On the one hand, this is a fair statement: the military actions and intervention in 2014-2015 were limited to part of the eastern regions and Crimea, but in economic terms, things were even worse. Yanukovych's rule left the country on the brink of bankruptcy: in 2014-2015, Ukraine lost about 16% of GDP excluding the occupied territories (i.e. up to 30% of the 2013 economy), prices rose by almost 80% in those two years, and the hryvnia lost two-thirds of its value against the US dollar.

The fundamental difference today is significant international aid, which allows to limit the use of emission, and also makes the situation with the exchange rate controlled. Thus, the NBU's foreign exchange reserves have exceeded USD 27 billion (which is more than the pre-war level of February), but we can still expect a gradual devaluation of the hryvnia in 2023 due to the easing of currency restrictions in the future.

The crisis of 2014-2015 did not have such devastating consequences as the all-out war of 2022-2023, but the economic miracle did not happen then due to slow reforms and lack of investment, but now the situation is completely different: on the one hand, some assets were completely destroyed, and, unfortunately, many of our compatriots died, and on the other hand, we are already talking about hundreds of billions of euros of potential reparations in various forms that can be used to rebuild Ukraine. In fact, we do not really imagine such a large amount of potential investments and a big (but positive) problem will be their effective development.

We see this year as the main window of preparation for 2024, where double-digit economic growth is quite possible after the Victory and the beginning of Ukraine recovery. Despite the fact that in general the current macro situation is far from good - the economy is more than the sum of macro indicators, and that is why you can often hear "we are surprised", "business has exceeded all expectations", etc. That is why the key events are now taking place on the frontline, and the home front only needs to step up its efforts and increase assistance to both the army and citizens in need of support.


Thus, in planning our activities we proceed from the following:

  • Ukraine will definitely win in 2023, although Russia's aggression may continue (for example, in the form of shelling, as we see in the example of Israel), but our task as a responsible employer is to be prepared for different scenarios. For example, we opened an additional fully autonomous office near Kyiv in 2022, which allows our employees to work safely in any conditions.
  • Exporting services is with us permanently: we are actively integrating into the Western business environment to have a choice between domestic or foreign markets, depending on the situation. We realized that diversification is not only about different products, but also about different markets.
  • Ukraine can get an impetus for rapid and sustainable growth as early as 2024 due to the start of recovery funds’ arrival. A big potential problem is the qualified personnel that will be needed in Ukraine to support a significant number of international projects. We are preparing for this development and actively recruiting new employees, but we understand that even such efforts may not be enough.
  • We are not too pessimistic about investments in Ukraine and its rebuild: we, as BDO, are starting to communicate with governmental organizations of different countries about potential insurance of investments in Ukraine, which should open the way for large investors (for example, in the defense sector).
  • We also believe that despite the potential threat of a recession in the world, Ukraine may not notice such a recession, because the factor of war and post-war recovery of Ukraine will allow for many subsequent years to form a completely different political and economic agenda.
  • Ukraine will no longer be left alone at the crossroads: we no longer have an alternative to integration into the EU and NATO (or any other security formation), the ties that we have formed with our Western neighbors, including at the level of ordinary people, are invaluable and will help us a lot.
  • Ukrainian business is the best and will be very competitive at EU market.

So, we remain optimistic, because we will definitely win and realize our historic chance to create a prosperous and secure Western country.