Ukraine’s economy is already paying the price of tension with Russia

In an office in the center of Kiev, Dmytro Voloshyn enumerates the questions that he and many other Ukrainian businessmen are asking themselves, in this context of tension and the risk of a Russian invasion.

"What will happen if there is an escalation? What will happen to foreigners who work in our Kiev offices? What will happen if martial law is applied? What will happen to the banking sector? Will we be able to pay everyone? What will happen if there are problems with the internet?"wonders this 30-year-old man, showing diagrams on his laptop that develop the different possible scenarios.

Preply, the company co-founded by Dmytro Volochyn in 2013, presents itself as one of the world’s leading online platforms that connects students and teachers of foreign languages. It has 400 employees in Kiev and Barcelona.

The company, considered one of the most successful in the national high-tech sector, has design offices, with plants and a cafeteria for employees.

At the moment the activity continues without any sign of panic despite warnings from some Western countries. But everyone prepares for the worst.

"We have a plan, but we do not apply it because we trust that the situation will remain the same", explains Dmytro Volochyn to AFP, who recalls that Ukrainian companies, like the population, are not experiencing their first escalation.

The tension has not ceased since the annexation of Crimea in 2014, which was followed by a conflict in the east with the Moscow-backed separatists that has so far left more than 13,000 dead.

"We are not panicking because this situation has been going on for eight years. There has always been some kind of tension, only now it is more immediate ", it states.

The outbreak of the crisis in 2014 actually encouraged his company to grow abroad to survive the economic collapse in Ukraine. A decision that has protected it in part from the current turbulence.

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Weak currency and inflation

The risk of an imminent Russian invasion, despite denials from Moscow, has not had as catastrophic consequences as in 2014, but it is already having a very real impact, freezing projects or scaring away some investors.

The central bank has lowered its growth forecast for 2022 from 3.8% to 3.4%. It also had to spend more than $1 billion in January to keep the hryvnia afloat, weighed down by capital outflows from concerned investors.

The currency hit its lowest level in four years, fueling inflation and sapping purchasing power in one of Europe’s poorest countries.

The situation has led President Volodimir Zelensky to distance himself from American fear-mongering. "We don’t need this panic" because "we have to stabilize the economy", he claimed.

For Sofya Donets, an economist at the investment firm Renaissance Capital, Ukraine is in a stronger position than in 2014 to withstand financial pressure.

The country has more than doubled its reserves and is benefiting from Western aid, with the European Union promising another 1.2 billion euros ($1.35 billion). A new payment from the International Monetary Fund (IMF) is also being discussed.

"This serves to temper the effects of prolonged turbulence, but not of a large-scale military conflict", said the economist AFP.

The Ukrainian state, unable to obtain loans on international markets, depends on its foreign donors and regrets suffering from the geopolitical situation despite what it considers solid economic fundamentals.

According to a survey by the European Business Association, which includes many multinationals operating in Ukraine, 40% of its members have prepared emergency plans and 40% intend to do so.

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