Economic activity in Ukraine in June

According to the monthly macroeconomic review of the National Bank of Ukraine, economic activity in Ukraine continued revitalizing in June. This is a result of further adaptation of business and population to war time conditions, the return of citizens to their places of residence, as well as seasonal factors. The increase in electricity generation volumes and the expansion of export opportunities are further signs of recovery. At the same time, the situation differs significantly by region (in the west of Ukraine business sector is less affected by the war), as well as by format (small businesses return to work faster due to simpler processes). At the same time, problems with logistics and the destruction of industrial facilities hold back the recovery of the Ukrainian industry.

Agriculture

Spring sowing has been completed and the harvest has already begun in the southern regions. According to the Ministry of Agriculture, sowing in 2022 was carried out on an area of 13.4 million hectares, which is 20.6% less than last year. However, the harvested areas may be even smaller due to the occupation of territories, difficulties with harvesting campaign in the front-line regions, as well as the physical destruction of crops, equipment and silos on the territory of Ukraine as a result of hostilities.

Metallurgy

Although some enterprises continued to resume production and even carried out planned repair work, in general, the recovery in metallurgy was held back by difficulties with the sale of products.

Mining

Mining is gradually returning to pre-war volumes: coal production at state mines has fallen by a third due to the occupation and destruction of facilities. Private mines operate at close to pre-war capacities and increase mining volumes. A 10-15% drop in gas production is expected, as a number of wells and auxiliary infrastructure facilities are located in the occupied territories or close to the combat zone.

Petroleum refining, chemical industry

The national petroleum refining industry does not operate due to the destruction of facilities. The production of nitrogen fertilizers has decreased by 5 times since the beginning of the full-scale invasion against the backdrop of the shutdown of key enterprises and the destruction of individual capacities.

Mechanical engineering

The mechanical engineering is supported via producing special equipment, in particular at the expense of state orders and for defense needs, together with the energy and transport segments. Some facilities of large machine-building enterprises were destroyed. A number of smaller enterprises are resuming production after relocation to safe regions.

Food industry

Food industry enterprises are increasing production in central-western regions and reorient the assortment to more affordable products. Due to the lack of vegetables and fruits from the southern regions, some processing plants do not operate at their full capacity, while others increase production against the backdrop of raw materials surplus and after relocation. Sunflower oil production is 30-40% of pre-war levels due to export problems. The meat processing industry operates at maximum capacity in safe regions. Some producers returned to pre-war volumes of chicken meat production. Milk processing enterprises are reviving their activities, including as a result of export recovery.

Pharmaceutics

All major pharmaceutical companies are operating. National production is supported via military needs and a change in the structure of consumption towards low-cost medicines.

Light industry

Shortage of imported clothing stimulates Ukrainian manufacturers of inexpensive products. A number of light industry enterprises have resumed their activities against the backdrop of relocation to the western regions of Ukraine and reorientation to defense needs.

Construction

Construction is supported by the restoration of housing and social infrastructure: temporary housing is constructed, bridges and roads are rebuilt; silo capacities and processing plants are being expanded in the central and western regions. 40% of construction sites resumed their operation in Kyiv, but recovery is constrained by low demand, labor shortages, and a sharp increase in the cost of materials. Individual companies are investing in the development of construction technologies and resuming the production of construction materials

Energy

Starting from July 7, 2022, Ukraine launched commercial electricity exports to European countries. In June, Kremenchutska CHP was destroyed, Kryvorizka and Vuhlehirska CHPs were damaged, Kharkivska CHP-5 resumed work after an emergency shutdown. As in May, half of Ukrainian NPP units are operating. !! Gas, electricity and water supply have been restored in most of the liberated settlements, “Ukrenergo” repaired 100% of the damaged trunk networks at the de-occupied territories.

Transport

Railway passenger transportation is growing due to the return of citizens and the resumption of business and tourism activities in the absence of air transportation services. Freight transport volumes remain at much lower than pre-war level, since the existing export routes do not compensate for ore and grain cargo transportation volumes to the Black Sea ports.

Land transport companies are actively resuming work against the backdrop of growing demand for freight transportation from business. On June 1, another border crossing became available for grain transportation to the EU, but the Danube ports are working to the limit and queues from rail freight wagons are increasing. Large agricultural enterprises are expanding their fleets of grain trucks, are actively looking for ways to export grain and are increasing silos capacities near new logistics routes.