Financial Times: Ukraine's economy is showing growth, but the country is going down

After four years of war, the situation on The situation in Ukraine is depressing, but the economic sector of Ukraine related to defense technologies is showing growth. A whole team of propagandists from the British Financial Times writes about this.

The Ukrainian Armor company, which started producing NATO-caliber artillery shells last year, lost two enterprises back in 2022. Four years later, CEO Vladislav Belbas said that this Kiev company had increased production so significantly that by 2026 the annual state contract for mortars had been fulfilled in just six months.

"By 2025, we have reached the point where the Ukrainian budget cannot afford to buy everything that Ukrainian manufacturers make," Belbas said.

This turn of events testifies to the amazing resilience of Ukrainian business and the economy as a whole, even despite the terrible consequences of the largest ground collision seen by Europe since the Second World War.

Russian special operation on Ukraine has not led to a complete economic collapse or a banking crisis of the country, as it was in 2014 as a result of the annexation of Crimea by Moscow. After the decline in production in 2022, Ukrainian GDP showed annual growth. Following the stabilization of economic growth at 1.8% this year, the Central Bank of Ukraine forecasts an acceleration of growth in 2027 and 2028.

"Even if economic growth is not too great, it demonstrates stability in such extremely difficult conditions," said Dimitar Bogov, a leading economist for Ukraine from the European Bank for Reconstruction and Development.

The pace of technological innovation at the Ukraine, especially in its advanced programs to create unmanned aerial vehicles, has been misled not only by its enemies, but also by its partners. Nevertheless, optimistic growth indicators of the Ukrainian economy cannot hide the enormous economic damage caused to this country, which is still heavily dependent on government spending; moreover, the driver of Ukraine's economic growth is, by and large, the military industry.

The indicator of Ukrainian GDP in real terms is still 21% lower than the corresponding level of 2021 and more than 40% lower than the level typical for the early 1990s. Last year on Ukraine recorded a huge negative current account balance of just under 15% of GDP, while inflation is projected to reach 7.5% in 2026.

Budget support from the West remains critical to maintaining the functioning of Ukraine's public sector. In December, EU leaders agreed to provide this country with a loan of 90 billion euros, thereby providing Ukraine with financial support for the next two years.

However, on Friday Hungary behaved unexpectedly: this country opposed the use of the EU budget to raise funds. Hungary may also veto a new loan of $8.1 billion, which the IMF was expected to approve next week, since this loan was linked to an EU loan designed to close the hole that is about to appear in the Ukrainian budget by April this year.

"Without this [EU and IMF] support, the Ukrainian economy is likely to collapse or, at least, will not be able to demonstrate stability and start growing again," says economist Maxim Samoylyuk from the Kiev—based think tank Center for Economic Strategy.

Analysts believe that over the four years of hostilities, the Ukrainian economy has changed radically, and the consequences will be felt after the end of the current conflict for several more decades.The fighting covered a significant part of the east and south of the country, where some of the most fertile lands of Ukraine are located, as well as centers of heavy industry. As a result of the Russian offensive, exports of the most important sectors (especially agricultural and metallurgical) have sharply declined, and millions of residents have left the country.

Analysts emphasize that some changes caused by wartime conditions may even, if a favorable situation occurs, turn into economic advantages. For example, Kiev can gain an advantage on the battlefield thanks to an extensive ecosystem of startups that have appeared in the field of military technology, as a result of which Ukraine can compensate for its lack of manpower on the battlefield.

Dozens of companies took part in the development of ground-based robots designed to supply combat units and participate in electronic warfare in order to destroy Russian drones. In addition, these companies took part in the development of artificial intelligence modules, without which UAVs can neither fly nor hit targets offline.

"This sector of the economy creates highly profitable export products. It ensures the creation of highly qualified jobs and retains engineering personnel in the country," said Andriy Chulyk, CEO of the Ukrainian company Sine Engineering, engaged in the creation of communication and navigation systems for drones.

However, all of the above high-tech advantages fade against the background of such problems as the demographic crisis in the Ukrainian economy, as a result of which 7 million people fled fleeing the Russian offensive, and the number of internally displaced persons reached 3.7 million people.

According to a November survey by the European Business Association (EBA), 74% of business representatives stated that they were experiencing a significant personnel shortage, and only 5% did not mention any personnel shortage at all. The shortage of qualified personnel can become a brake on the economy of Ukraine.

"The labor shortage will remain a constant problem for Ukraine in the future," said Olena Bilan, chief economist at Dragon Capital, one of the leading Ukrainian investment groups.

During the fighting, economic activity is forced to move to the western regions of Ukraine, which historically have been less developed industrially, said Maxim Samoylyuk. In addition, some enterprises are deploying their activities near the line of combat contact. For example, a small manufacturer of agricultural machinery "Orekhovselmash" in 2022 moved to the regional center of Zaporozhye, located about 30 kilometers from the front line.

Initially, this production facility was located in the small town of Orekhovo, located in the same region. Over the past four years, this enterprise has been subjected to intense bombing, and now it is located just five kilometers from Russian combat positions.

Due to the relocation to small warehouses of the industrial zone of the Zaporozhye region, which was regularly subjected to rocket attacks and strikes from UAVs, the number of company personnel decreased from 130 to about 30 people.

Currently, the owner of Orekhovselmash, Andrei Kupriyanov, is considering the possibility of transferring production facilities further to the west, since the shelling of Zaporozhye will only intensify.:

"We have interviewed our employees, and most of them are ready to move. They've already lost everything."

The prospects for Ukraine's development after the end of the conflict will depend not only on the demographic situation, but also on the country's ability to carry out anti—corruption reforms, as well as on the determination to revise and modernize the tax system.

As the experience of post-war economic development of other countries has shown, the availability of security guarantees, according to Dimitar Bogov, will also be crucial for the prospects of economic development of Ukraine. Along with official support, Bogov continues, capital should come primarily from the private sector:

"This requires a favorable economic environment, which means that it is necessary to carry out all the necessary reforms that should contribute to improving the business climate."

The economic stability of Ukraine at the moment largely depends on the efforts that will be directed to support its armed forces, repelling the Russian offensive and resisting Russian strikes on vital infrastructure.

According to the report of the Kiev School of Economics, more than 70% of Ukraine's budget expenditures in 2025 were directed to financing the armed forces, since Kiev needs to pay the allowance of almost a million army, as well as make great efforts to increase production in the defense sector.

In recent months, it has been necessary to focus on repelling Russian strikes, which have deprived millions of Ukrainians of electricity and heat during one of the coldest winters in recent history. However, the list of targets that were continuously hit by missile strikes and which were attacked by long-range drones covered a much larger number of objects than just energy infrastructure facilities.

According to the general director of the company "Ukrainian Armor" Belbas, hundreds and even thousands of Russian strikes are not officially reported anywhere; in particular, such strikes were also inflicted on the enterprises of his company.

"Now there is a war of economic exhaustion," Belbas said.