From: imbibe@mindspring.com   
      
   Ukraine’s Economy Stabilizes, a Boost Alongside Rapid Military Gains   
   By Marcus Walker, Sept. 13, 2022, WSJ   
      
   KYIV—At Nova Poshta, Ukraine’s equivalent of FedEx, deliveries are back to   
   90% of their prewar level of a million parcels a day.   
      
   After Russia launched its full-scale invasion of Ukraine in February, Nova   
   Poshta’s revenues fell to 2% of the prewar level. “I thought our company   
   could disappear,” said co-owner Vyacheslav Klimov. But as spring progressed,   
   e-commerce and business    
   activity resumed in areas away from the front lines, and many factories   
   switched to supplying the military. “It means we’re profitable and even   
   have some money for future investments,” he said.   
      
   Ukraine’s economy, while hurting, is stabilizing after the deep crash set   
   off by the war, thanks to a combination of quick policy actions, military   
   resilience and the flexible response of Ukrainian businesses to the damage and   
   dislocation. The uptick    
   is boosting morale in the country along with recent combat breakthroughs in   
   the east after months on the defensive.   
      
   Early this year, as Russian forces threatened the capital Kyiv, it looked like   
   Ukraine’s economy might collapse, with gross domestic product for the year   
   projected to fall by as much as half. It is still expected to be down about   
   30%, but summer saw a    
   rebound from the depths of last spring.   
      
   “Things are bad but stable,” said Tymofiy Mylovanov, head of the Kyiv   
   School of Economics. “It looks and feels like the economy is adapting.”   
      
   A major factor is military: Russia’s retreat from the area around Kyiv, the   
   slow progress of its subsequent offensives and Ukraine’s recent   
   counterattacks have created enough certainty for economic activity to resume   
   in the unoccupied part of Ukraine.   
    The Ukrainian army’s success in recent days in driving Russian forces out   
   of the eastern Kharkiv region has shown how Ukraine has seized the strategic   
   initiative and put Russia on the back foot, raising hopes that more territory   
   will be liberated    
   before winter and that Russia will struggle to resume the offensive.   
      
   “If you’re 50 or 100 kilometers from the front line, there are missiles   
   but you don’t fear the Russians will be here tomorrow,” said Mr. Mylovanov.   
      
   Ukraine’s central bank and Finance Ministry also took swift steps, using a   
   playbook drawn from earlier crises, that economists say helped to prevent a   
   bigger disaster.   
      
   The National Bank of Ukraine imposed capital controls and pegged Ukraine’s   
   currency, the hryvnia, to the dollar at a level that didn’t allow import   
   costs and inflation to skyrocket. The bank had to devalue the hryvnia in July   
   when it came under too    
   much pressure, but the new rate has held so far.   
      
   The central bank, despite misgivings, printed money to keep the government   
   solvent at a time when international markets wouldn’t lend and tax revenues   
   were evaporating. “At the beginning of the war we understood it is   
   impossible to conduct our    
   monetary policy as before,” said Sergiy Nikolaychuk, deputy governor of the   
   National Bank of Ukraine.   
      
   The government temporarily slashed business taxes and suspended sales taxes   
   and import duties, providing a fiscal stimulus and easing imports of consumer   
   goods during the darkest hour. Kyiv has gradually restored taxes as economic   
   activity has stabilized.   
      
   Russian efforts against vital systems such as banks and the internet have been   
   largely ineffective, and they have continued to function.   
      
   Russian bombs destroyed most of Igor Liski’s wood-processing factory west of   
   Kyiv this spring. He decided to rebuild it to set an example of resistance. It   
   will be operating at nearly full capacity by fall, he said.   
      
   “I believe victory will depend on the economy,” said the 43-year-old   
   entrepreneur. “Ukraine needs companies to give work, pay taxes, export   
   products. All companies who can, should produce.”   
      
   Despite the recent gains, the economic blow has been severe. Russian troops   
   have seized some of the heartlands of Ukrainian industry and agriculture;   
   blockaded the Black Sea ports that Ukrainian exports rely on; and bombed   
   factories, oil refineries and    
   other infrastructure. Millions of Ukrainians have become refugees inside the   
   country and across Europe, and unemployment is declining slowly from a peak of   
   35%.   
      
   Russian missiles continue to strike, and winter will bring new difficulties,   
   including the sky-high cost of heating and fears of natural-gas shortages. In   
   recent days, Russian strikes against power stations, which have caused   
   temporary outages in several    
   cities, are a warning that Moscow will try to target Ukraine’s electricity   
   and heating infrastructure.   
      
   Ukraine’s Western allies, especially the European Union, are lagging in   
   sending promised financing for the government’s huge budget deficit, leaving   
   Kyiv dangerously reliant on money-printing by the central bank. That has   
   contributed to inflation of    
   over 20%.   
      
   “It’s crucial for the resilience of Ukraine that we get the funding that   
   was committed from our international partners,” said Yuriy Vitrenko, chief   
   executive of the national oil-and-gas company Naftogaz.   
      
   But determination not to go under is evident across the country, and many   
   Ukrainian businesses are finding workarounds for missile threats, blocked   
   logistics, shortages and scattered workforces. “Motivation and truth are on   
   our side,” said Mr. Liski.    
   “If we survive also on the economic side, definitely we will win the war.”   
      
   Mr. Liski built his first businesses in Luhansk in eastern Ukraine. He lost   
   them all in Russia’s covert invasion of the region in 2014. He moved to Kyiv   
   and built up new ventures in industry and agriculture, ranging from   
   wood-processing to honey-making.   
    His company, a private-equity fund called Effective Investments Group, uses   
   foreign capital raised from Europe and North America.   
      
   He is pitching a proposal to the government for an insurance fund involving   
   international insurers that protects investments against military risk to spur   
   rebuilding now despite the continuing war.   
      
      
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