During the armed conflict, Ukraine’s GDP fell by 25%: Ukraine is in urgent need of labor and lacks funds for state expenses – iDNES

The armed conflict is taking a heavy toll on Ukraine’s economy, which was already fragile before hostilities began. Since the start of the conflict, Ukraine’s GDP has dropped by as much as 25%.

This is reported by iDNES.

It is well known that money is indispensable in war.

“Only a strong economy can build a strong army,” noted Ukraine’s Minister of Finance, Serhiy Marchenko, not long ago.

This leads to another issue: Ukraine is facing an increasing labor shortage. Many people are absorbed into the military, and millions of Ukrainians have fled abroad to escape the consequences of the conflict.

Women have successfully replaced men in many positions, including in heavy industry, but their numbers are also insufficient. For example, in the industrial city of Pavlodar, women were recently permitted to work underground in mines for the first time. This decision was made out of desperation, as coal remains essential during the conflict, but there is a shortage of men.

Mines are not the only places experiencing acute worker shortages. Ukrainian job websites report an unprecedented number of vacancies.

The situation is highly complex. Kyiv continues expanding mobilization efforts, as many Ukrainians have fallen in battle, and military ranks need replenishing. This places companies and enterprises in a difficult position: every day, finding new workers becomes more challenging, further damaging an already battered economy.

It is expected that this problem will worsen as the conflict continues, increasing Ukraine’s dependence on foreign financial aid.

“Without Western financial aid, Ukraine’s economy would collapse,” said Serhiy Fursa, an economist and deputy director of Dragon Capital, an investment company in Kyiv.

Military production has provided some economic stimulus following the sharp decline during the conflict’s first year, but growth remains limited due to the labor shortage. Constant disruptions in the country’s power supply, caused by ongoing Russian strikes on energy infrastructure, further complicate matters, disrupt production, and force companies to invest in costly generators. This uncertainty also affects some private foreign investors.

Economists estimate that mobilizing 200,000 to 300,000 new recruits would reduce the economy by approximately 0.5%. According to local authorities, some people are evading mobilization and, therefore, not working, but the exact number is unknown.

Women are doing their best in new roles, operating heavy machinery in factories, working in steel mills, driving tractors, and even recently piloting Kyiv metro trains. However, they cannot handle everything alone.

Ukrainian authorities have granted exemptions for some industries, including critical infrastructure and arms production, to retain a portion of their workforce from mobilization. However, managers describe this as a burdensome bureaucratic process that affects only up to 50% of male workers. Many skilled workers are irreplaceable, and training replacements can take up to six months. Ukrainian lawmakers are exploring ways to keep the economy running, including a proposal for companies to pay 20,000 hryvnias per employee monthly to prevent their conscription. However, such suggestions are contentious, as some argue that national defense should take priority.

Ukrainian manufacturing companies have already lost 20% of their workforce due to mobilization. Many are maintaining production only by stretching their resources to the limit.

Economists fear that another wave of mobilization could be catastrophic for the economy. Combined with low tax revenues, Ukraine struggles to fund both its defense and basic government functions.

Ukrainian Prime Minister Denys Shmyhal has stated that the country needs $42 billion annually to cover its massive deficit and rebuild essential infrastructure. Most of these funds must be borrowed. Much of the financial aid from Western countries is spent on Western arms manufacturers supplying Ukraine. For example, only $8 billion out of a $60 billion U.S. aid package will reach the Ukrainian government’s budget directly.

The West continues to assure Ukraine of ongoing financial and military support during these challenging times. However, questions remain about what will happen, for example, after the U.S. presidential elections if Donald Trump returns to the White House.