You're reading: Economic toll of Russia’s war growing daily for Ukrainians

The economic toll of Russia's war against Ukraine's eastern Donbas region is growing. The Ukrainian economy is expected to shrink by up to 5 percent this year with the hryvnia already hitting all-time lows of 26 to the dollar.

Business planning is becoming more complicated as consumers pull back from spending and try to stash savings in dollars, not tempted by banks’ offers of 27 percent interest on hryvnia deposits. To serve such high rates, banks would have to lend money out at even higher rates, which is not likely.

GfK Ukraine, a market research company, says the low consumer confidence rating is unlikely to change much before the war ends and the current economic crisis lifts.

Layoffs are expected to send unemployment this year to 10 percent, a 12-year high, creating fierce competition for the fewer vacancies, which will only depress wages further. Workers are already showing discontent, such as coal miners protesting to demand subsidies. Meanwhile, consumers who borrowed in dollar-denominated loans to buy homes want the government to lobby their interests with private banks.

Unlike the global crisis of 2008-2009, when Ukraine’s hryvnia fell from 5 to the dollar before settling to 8, Russia’s war and the massive corruption of ousted President Viktor Yanukovych, are the reasons for the current crisis.

Even the largest and richest, such as billionaire Rinat Akhmetov, are not immune. His Illich and Azovstal steel plants near the eastern war zone have almost ran out of natural gas. Akhmetov had to stop steel production in Yenakieve.

Nadra, the nation’s 11th biggest bank, was declared insolvent on Feb. 6. Its January balance sheet showed a book value of $164 billion. But last year’s losses at $55 million, combined with deposit outflow and hryvnia depreciation, proved to be too much. It is only the leading symbol, however, of a very troubled banking sector.

Mriya, an agriculture company that defaulted on its debts last year, asked creditors to keep the company going instead of selling it, given the low prices for Ukrainian assets right now. Mriya’s overall debt is $1.3 billion.

The ongoing crisis has left Anatoliy Onoprienko without his job at Russkiy Standard, a bank that employed him for seven years. “I realize that there’s a banking crisis right now and I won’t be able to find a job at another bank, though I have valuable experience,” he says. “I think I’ll have to start looking for work elsewhere, whatever it will be. Learning English to be more competitive on the job market is on my to-do list.”

Galyna Tverdohlib, who works at the Paris office of global steelmaker ArcelorMittal, says she’s worried about the Kryvy Rih plant the company bought in 2005 for $4.8 billion. Company officials “discussed the problems with iron ore and energy supplies and talked about war all the time, looking at the map. It was sad to hear all this about my country in Paris.”

Being part of a global giant helps, Tverdohlib says, because the parent company has enough liquidity to keep its Kryvy Rih production unit afloat. But like everyone else, she asks: “When will this nightmare in Ukraine end?”

Kyiv Post associate business editor Ivan Verstyuk can be reached at [email protected].