Ukrainian Businesses Felt Unsafe and Lacked Workers in 2024 – Chair of IER Think Tank

In 2024, Ukraine’s economy remained resilient. Still, government officials began looking at necessary but unpopular policies such as raising taxes, Chief Executive of The Institute for Economic Research and Policy Consulting (IER) Oksana Kuziakiv told Kyiv Post.

The IER was created back in 1999 when Ukraine lacked independent economic research to create policy and advise the government. It has helped Ukraine to become a member of the World Trade Organization, develop civil society foundations and become ready to start membership negotiations with the EU. It also launched research to observe business sentiment.

Kuziakiv explained that Ukraine’s entrepreneurs don’t typically go in for long-term planning as long as revenue continues. They also don’t fully trust the government, which is perhaps linked to the prevalence of a shadow economy in the country.

“Everybody said we would die in this war, but we didn’t. Maybe it’s because businesses do not borrow massively. But maybe it’s because they had resources nobody knew the businesses had,” Kuziakiv told Kyiv Post.

Other Topics of Interest

Ukraine’s Metinvest Produces First Armored Protection for US Patriot System

Ukraine’s leading steel company and pipe producer has added military production to its outputs.

Anxiety among businesses

Over the course of 2022-2023, Ukrainian businesses were busy tackling a 30% drop in GDP, destruction to supply chains, soaring inflation, migration of 10 million Ukrainians within the country and five million abroad.

However, strikes on Ukraine’s energy infrastructure and lack of access to electricity due to power outages from October 2022 lowered production and raised anxiety.

According to IER research, businesses complained about working in dangerous conditions and lacking employees. From January 2024, these two problems became the leading issues, Kuziakiv said – even in the regions least affected by Russia’s missile strikes.

“This obviously indicates that [Russian Army General Valery] Gerasimov’s goal of intimidation absolutely worked. We saw strange things… For example, those regions that were far away in the Carpathians saw 100% of entrepreneurs believing that it is dangerous to work,” Kuziakiv noted.

“It is dangerous to work” reportedly became a more prominent response when the Armed Forces of Ukraine (AFU) was reporting pessimistic news from the frontline in the summer of 2024, whether it was losing a village or losing extra meters to Russia’s advance.

Lack of workers

For its business sentiment research, the IER speaks to 500+ enterprises located in 21 of 27 regions of Ukraine.

Two commonly reported reasons for a lack of workers include the migration of Ukrainians abroad and displacement inside the country, as well as mobilization of men to serve in the AFU.

However, Kuziakiv does not believe the problem to be so black and white, with limited statistics and the absence of a census being inhibitors to understand these issues more fully.

“Maybe employees are mobilized, but what if this means businesses are increasing their capacity and are looking for employees for new tasks?” she said. Such steps might not therefore denote a crisis but be a signal of economic recovery.

Ukraine’s Ministry of Economy launched a series of programs for reskilling employees, but Kuziakiv does not believe they will be very successful.

A key problem is that business in Ukraine provide salaries lower than in the EU, and five million Ukrainians who received temporary protection status in the EU started working abroad can see the difference, Kuziakiv explained.

“We are at risk of losing those people who remained in Ukraine and see different salaries abroad for the same job. And other countries will provide them with some social benefits”, Kuziakiv told Kyiv Post.

Outlook for 2025

Kuziakiv does not believe in miracles for Ukraine’s economy in 2025. She and her colleagues at the IER observe that Ukraine’s economy is now working at its maximum capacity and cannot physically deliver a higher real GDP increase.

She believes that the pace of the economy will remain almost unchanged and similar to now.

“Even if we see a freeze of the war in 2025, Ukraine will still need to maintain its defense spending. But it won’t be worse – there’s no more room for the economy to fall,” she told Kyiv Post.