World Economy

Ukrainians Feel Effects of War, Struggling Economy

Ukrainians Feel Effects of War,  Struggling Economy
Ukrainians Feel Effects of War,  Struggling Economy

Kiev does not yet feel like the capital of a country at war. On the surface, the city is functioning much as before, with the gatherings of uniformed men preparing to head back east the main indication that all is not well.

But if you move away from the center of the city, where the famous Euromaidan protests took place and where international cafes and restaurants line the streets, and head to the outskirts, the residents of Kiev are starting to feel the combined effects of war and a struggling economy, Aljazeera reported.

Alexandra Melnyk lists what is becoming more expensive as the war drags on–rice, buckwheat, milk, eggs, gas, electricity, hot and cold water.

“There are people in charge of this country,” she says. “They are driving Ukraine into an abyss.”

Like many Ukrainians who criticize the government, Alexandra says she is already working two jobs in order to support her large family.

  Small Growth

The World Bank on Wednesday predicted that Ukraine’s economy would grow by 1% during 2016–just half the growth projected by the country’s government and financial advisers.

That comes after a contraction of 12% in 2015. “After a 12% contraction in 2015, Ukraine’s economy may rebound modestly in 2016-18, supported by an easing of the conflict in the east and continued progress on its IMF-backed reform program,” the World Bank said in a report on global economic prospects.

The incremental gains come with a major restructuring of Ukraine’s debt as well as several fiscal measures, including job losses within the government, pension cuts and more expensive energy rates.

The World Bank added that the growth was dependent on “geopolitical tensions”, meaning that if the war with Russia escalates into a full-blown conflict once again, Ukraine’s economy will begin to backslide.

“The moderate growth improvement in the forecast period over 2015 depends on the management and mitigation of several key vulnerabilities, including persistent geopolitical tensions, sustained low oil prices, continuing policy uncertainty, and challenging external financing conditions,” the report said.

Between 2010 and 2014, Russia accounted for about a quarter of Ukraine’s exports, and so the continued tension between the countries is taking its toll.

In addition to a decrease in trade, Ukraine remains in a debt dispute with Russia, to whom it owes $3 billion.

On January 1, Russia started legal proceedings against Ukraine over non-payment of the debt and added that it would file a lawsuit in UK  courts.

The announcement came a month after Kiev issued a moratorium on paying the debt, which is part of a larger $15 billion payment agreement that was reached between Russian President Vladimir Putin and Ukraine’s former leader Viktor Yanukovich.

It was made in December 2013, as Yanukovich backed out of closer economic ties with the European Union, a move which in turn led to the Euromaidan movement, and eventually the war in Ukraine’s east.