Successfully investing in Ukraine

last updated on 7 June 2024 | reading time approx. 4 minutes

How do you assess the current economic situation in Ukraine? »
How would you describe the investment climate in Ukraine? Which sectors offer the largest potential? »
What challenges do German companies face during their business ventures into Ukraine? »
Why should companies decide to enter/remain in the Ukrainian market? »
In your opinion, how will Ukraine develop? »

How do you assess the current economic situation in Ukraine?

The end of the Russian aggression is not in sight, but the Ukrainian economy has stabilized and will grow again in 2024. However, the overall situation remains difficult and Ukraine is still dependent on international help.

In 2023, GDP (gross domestic product) rose by 5.2 percent. The economic growth for 2024 is expected between 3.7 and 4.0 percent. It is a positive development but it is still too early to speak of an economic recovery.

Further development depends on many factors, such as the further development and intensity of hostilities, expansion of the Black Sea corridor, international support for Ukraine from the IMF (International Monetary Fund) or other financial programs, and stable energy supplies. The forecasts are positive.

In 2023, the agricultural sector grew more than expected. Industrial production is also expected to grow again in 2024. Private consumption is expected to continue to be important economic growth in 2024.

Inflation fell slightly in 2023, around 5 percent less than in 2022. This is due to a good harvest in 2023 and the decline in energy prices on the world market. Inflation and exchange rate fluctuations are expected to remain moderate in 2024.

Government spending on the war remains very high. Seed income is very low. The tax increases are economically and politically unacceptable in the current situation. However, slight increases in tax revenue are expected for 2024 compared to 2022 and 2023. However, the budget situation remains difficult. Ukraine is dependent on international support.

How would you describe the investment climate in Ukraine? Which sectors offer the largest potential?

It is understandable that in the current situation a large number of foreign companies are not yet ready to invest in Ukraine. Nevertheless, many companies decide to make new investments in Ukraine. Ukraine needs foreign investment because this is the only way the ailing economy can get going, new jobs will be created and the people in Ukraine will have new prospects.

The country has already started rebuilding. A lot is being invested, especially in the infrastructure, functionality and safety of transport routes, energy systems, etc.

It is to be hoped that the war in Ukraine will soon come to an end. If a peace agreement is reached, Ukraine's GDP will grow rapidly in the next few years. Ukraine would like to have stronger ties to the EU and would like to make quick progress with the reconstruction of the country. Many European countries have already promised reconstruction aid to Ukraine. It is therefore conceivable that after the war Ukraine will become the largest construction site in Europe, which in turn means great opportunities for investors.

The following industries offered great potential until the outbreak of war in Ukraine and will continue to be of great importance after the end of the war:

Food industry
Construction industry
Agriculture
light industry
Auto parts industry
IT
Mechanical engineering
Logistics

What challenges do German companies face during their business ventures into Ukraine?

At the moment, the biggest challenge is to continue carrying out economic activity during the period of war. Many companies and their employees have returned to Ukraine. In the winter months, the energy bottlenecks and the associated power outages were a major challenge not only for companies but also for the entire population.

With 7 million Ukrainians having left their country, labour shortages are a major challenge in some regions of the country. The offices and authorities continue to work so that administrative matters can be completed without any problems and without delay.

Why should companies decide to enter/remain in the Ukrainian market?

Companies should look to the future now. Every war will eventually come to an end. Then new, interesting investment opportunities will arise. Ukraine has always been a country with very well-trained personnel and has benefited from its proximity to the EU's external border. Ukraine's future close ties with the EU, the possible EU candidate status, would mean enormous opportunities for economic growth for Ukraine.

Ukraine also has a lot of natural resources, especially large gas reserves and lithium. The overall picture promises enormous investment opportunities and positive development for Ukraine.

Unfortunately, the outbreak of war had the effect of putting the brakes on the economy. At the moment, many foreign investors are holding back from investing in Ukraine. But there are also a large number of investors who are now daring to enter the Ukrainian market. In our view, it is right and important to keep Ukraine in focus as an investment location in the future and to plan investments now after the end of the war.

In your opinion, how will Ukraine develop?

It all depends on the duration of the war and the intensity of the hostilities. In addition, Ukraine has received the status of an EU candidate country. With this status, Ukraine has access to EU financial assistance intended for countries preparing to join the EU, in the form of grants, investments and technical assistance. On the other hand, this status obliges the Ukrainian parliament to carry out a number of economic and political reforms in order to bring Ukraine into line with EU standards in many areas of economic, political and social life.

The EU Commission expects economic growth of 3.7 percent in 2024. From 2025 onwards, economic growth could become stronger as investment in Ukraine's reconstruction picks up. Reconstruction will be a task that will take many years. The need will be huge: building housing, infrastructure, energy infrastructure. This will of course stimulate the economy and offer great opportunities for investors. But first the war must end, which is what we really want for ourselves and for Ukraine.