BALTIMORE, MD, March 17, 2023 – New audio is available for media use featuring Anna Nagurney. She speaks about how Ukraine is managing one year after the Russian invasion. Nagurney herself is Ukrainian-American. Ukrainian is her first language. She is the Eugene M. Isenberg Chair in Integrative Studies in the Isenberg School of Management at the University of Massachusetts, Amherst. Nagurney is an Affiliated Faculty Member of the school’s Department of Civil and Environmental Engineering and the Department of Mechanical and Industrial Engineering. This content is provided by INFORMS, the largest association for the decision and data sciences. What follows are four questions and responses. These responses were provided on March 16, 2023.
Question 1: How is Ukraine’s economic infrastructure holding up after one year of war?
Time Cue: 0:55, Soundbite Duration: 3:26
“Since the brutal, unprovoked, full-scale invasion of Ukraine by Russia on February 24, 2022, Ukraine's economy has shrunk by more than 30 percent. There has been great damage to infrastructure (from agriculture to energy to steel), immense death tolls of defenders and civilians and suffering. Businesses have been impacted, and daily lives disrupted, leading to a refugee crisis in Europe and millions displaced even within Ukraine. The full-scale invasion destroyed schools, hospitals, ports, roads and bridges. The Kyiv School of Economics estimated the damages to infrastructure due to Russia's war on Ukraine at $138 billion as of December. Nevertheless, Ukraine's economy has proven more resilient than originally predicted. The resiliency speaks to the strength and durability of Ukrainians as well as to the government of Ukraine. The country has withstood the largest military aggression in Europe since World War II. There have been some "bright spots" in this very dark period. Ukraine is now in a "war economy." Before Russia's invasion, annual economic output had topped $200 billion. The banking system of Ukraine is an example of economic strength. It has worked throughout the war, even while under very large ground and air attacks. Ukraine's Central Bank stopped the outflow of capital. It instituted a fixed exchange rate and implemented other crisis measures. Amazingly, almost all the banks continued operations. This is a huge advantage for Ukraine! Thanks to this, according to the Governor of the National Bank of Ukraine, there is financing, and payments support for the economy, which remains fully operational. The government has income from taxes; social-security payments are being made. Also, there is great international assistance, and a lot of fundraising going on to support the armed forces, to provide humanitarian relief, and to support different sectors, including education, which I care deeply about, as well as healthcare. Ukrainians have demonstrated an unparalleled ability to withstand the enemy and also to adapt to the new war economy environment. Another bright light in the war economy of Ukraine has been the IT sector. According to the National Bank of Ukraine, IT industry export revenues actually increased by 23 percent year-on-year during the first six months of 2022 to reach $3.74 billion. This is extraordinary performance and speaks to the tech sector continuing to be a critical engine of Ukraine's economy and also its future, I might add. For example, in the new millennium, by 2020, the Ukrainian IT sector accounted for 8.3 percent of total exports and was a major contributor to Ukraine's Gross Domestic Product, its GDP.”
Question 2: What sectors of the economy and the supply chain has been most affected this past year and what were the impacts?
Time Cue: 4:28, Soundbite Duration: 3:31
“Both agricultural and the energy sectors have experienced major impacts. Since I work closely with Kyiv School of Economics colleagues on agricultural supply chains, let me speak on that sector. Before the war, Ukraine's agricultural sector made up about 12 percent of its GDP and about 40 percent of its exports. Ukraine has been called the breadbasket of Europe if not the world, and the food grown there (wheat, barley, sunflower products, corn, etc.) in recent years has fed up to 400 million people annually. Before the war, Ukraine exported about 5 million metric tons of grain a month, with about 90 percent from its ports on the Black Sea. MENA countries (Middle Eastern and North African countries) have relied heavily on grain from Ukraine. Also, the World Food Programme purchased 50 percent of its grain from Ukraine. According to a Kyiv School of Economics Agrocenter report, direct losses in the first 8 months of the war to Ukrainian agribusiness were at about $6.6 billion or 23 percent of the total value of its farming assets. As for indirect losses on Ukraine's agricultural sector - the estimate is about $40 billion for 2022. One has to realized that farmland makes up about 70 percent of Ukraine and the government estimates that about one-third of its fields are unfit now for planting. The losses have been widespread and severe to agricultural infrastructure with more than 5 million hectares of farmland damaged and in need of demining and recultivating. A great deal of farm machinery has been destroyed in the war; storage facilities have suffered damage, and livestock farmers have lost huge amounts of animals because of bombings, other forms of destruction, or being felled by disease and starvation. Looting and theft by the Russians of agricultural products has also taken place. Even if the war is stopped today it would take about a decade for Ukraine to rebuild its agricultural sector. Financing continues to be a big issue along with high logistical costs associated with getting products to markets. Note that these great challenges continue even with the Black Sea Grain Initiative brokered in July 2022 with the United Nations and Turkey, enabling the reopening of maritime routes on the Black Sea, with a renewal of the agreement on November and another deadline now approaching (March 18). We are not sure if it will be extended for another 120 days, or perhaps 60 days. The initiative overall has helped but it is not a panacea, given the challenges I have noted with the destruction that is ongoing. Farmers need to get their fields prepared and to sow their crops this spring. They risk their lives every day to feed people. Their heroism is extraordinary.”
Question 3: What has Ukraine done right to continue to sustain economic activity and the best possible quality of life for citizens considering the circumstances?
Time Cue: 08:10, Soundbite Duration: 2:01
“I have earlier spoken about how well-functioning the bank sector of Ukraine is. What I find incredibly impressive is how quickly Ukrainians manage to repair energy infrastructure, which has been the target of attacks by the Russians for many months. Many families have suffered without heat and power in the winter and have had to deal with disruptions to Internet services. Ukraine's power grid operator works as fast as possible in restoring energy after the attacks. There are many diesel generators providing power to establishments, businesses and even apartments.The railways have also been incredibly impressive - transporting dignitaries, including leaders of the free world, such as President Biden to Kyiv. Their on-time record is also excellent. Over 200 foreign diplomatic missions have arrived in Ukraine by train so far in wartime. Ukraine’s rail network is huge at almost 15,000 miles. It is the sixth largest rail passenger transporter in the world, and seventh for freight. Airlines are not operating in Ukraine now. Its railway system is, literally, a lifeline for passengers and freight, alike, and even for mail and the delivery of pensions. The railway network has transported nearly 336,000 tons of humanitarian aid. And let's not forget about the education sector. Bomb shelters are required in all schools for them to operate in person. There has been a lot of fundraising activity and the building of such shelters. Education, and, of course, higher education, are essential to the recovery and reconstruction of Ukraine. Many schools and universities are managing to hold classes in person and also to teach online. And this is extremely admirable.”
Question 4: What does Ukraine need to do now so long as the future is uncertain?
Time Cue: 10:23, Soundbite Duration: 2:07
“Ukraine needs to guarantee that democracy and freedom prevail over the aggression, and it can do so with sustained help of other countries. It needs to also ensure that it has security once the war is over. Ukraine must continue the evolution of its governmental systems to the norms of the European Union. In addition, since logistics for its products from agricultural ones to minerals and even steel are essential for its economy, both now in in the future, it must continue the integration of its rail system with those of western Europe. It must work on the demining of its lands and bring agriculture back to the shining jewel that it was, and with proper investment and protection, will continue to be as we battle food insecurity around the globe. Recovery and reconstruction are taking place even in wartime and Ukraine will need to (as my colleague Yuriy Gorodnichenko and others have stated) deeply modernize the country. Infrastructure, technology, the business environment, institutions, education, healthcare and other critical elements of the economy and society will have to be uplifted. I believe that there will be accelerated growth in private-public partnerships and excellent opportunities for development in different sectors as we build better and stronger critical infrastructure and institutions. Ukraine and Ukrainians have endured horrors in this war. Their strength, innovation, and resilience throughout are awe-inspiring. They merit the full support of the free world until victory and peace are achieved.”
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