Sergey Atamas
Managing Partner, Kreston Ukraine

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As the Managing Partner at Kreston Ukraine, Sergey Atamas brings over 20 years of experience in Management Consulting, Corporate Finance, and Business Transformation. He drives business strategy, leads investment, and consultancy practices. Sergey’s expertise spans Equity and Project Financing, IT Strategy, Business Planning, and Customer Analytics. He has notable industry experience in IT, telecommunications, manufacturing, energy, consumer products, and logistics, contributing significantly to Ukraine’s evolving business landscape.

Ukraine’s road to economic recovery

January 4, 2024

Signs of Ukraine’s economic recovery may come as a surprise to some. Since February 2022, the global economy has felt the impact of the Russia-Ukraine war. From oil prices to the lack of grain, many countries have been grappling with supply chain issues.

Unsurprisingly, it has been Ukraine’s economy that has felt the keenest impact, as articulated in a recent interview with Sergey Atamas from Kreston Ukraine. Atamas presents a narrative of resilience and strategic redirection. “Initially, we lost about 50% of our clients almost overnight,” Atamas reveals, highlighting the immediate impact of the conflict on Ukrainian businesses. However, the global response was swift and transformative. Kreston Ukraine, for instance, reclaimed 90% of its pre-war income within one and a half years.

Allies support Ukraine’s economic recovery

Contrary to the grim forecast of a 50% GDP plummet, Ukraine managed a more modest decline to 29% in 2022, with projections of a 4.7% growth in 2023. This surprising resilience, Atamas notes, is credited to “unprecedented financial assistance from allies, increased government spending, and the liberation of territories.” Domestic borrowing and international support have played crucial roles, with the former surpassing $11 billion and the latter reaching $33.8 billion in 2023.

Ukrainian businesses redesigned their models almost overnight, Atamas explains,

“To stay afloat, Ukrainian businesses had to reconfigure internal processes and resort to crisis management. Some popular measures include adapting business strategies and focus to current market needs, expanding the customer base and target audience, going to international markets and seeking financing/investments or new partners.”

Atamas also highlights the role of technology in Ukraine’s adaptive strategies. Significant resources are being funnelled into military technologies and security projects. He has even launched his own new business recently, “Growexa is a SaaS platform oriented towards sourcing projects globally, providing investors with a detailed search system and in-depth AI-based analytics.”

Industry-specific impacts

Despite the intervention, certain sectors have borne the brunt of the conflict more than others, Atamas explains, “The metallurgical industry, a cornerstone of Ukraine’s economy, saw a 70% reduction in 2022. The energy sector, targeted heavily since late 2022, experienced a 90% drop in electricity exports. Agriculture, another key sector, faced losses exceeding $40 billion.” Atamas points out the necessity of “adapting business strategies and expanding the customer base” as vital survival tactics for businesses.”

Foreign investment

Aside from the challenge of keeping the Ukraine economy moving in order to not adversely affect citizens already dealing with the challenges of living with war, Atamas explains, international investors paused activity, but did not stop entirely, “In 2022, foreign direct investment inflows were 5.8 times lower than in 2021, amounting to $1.1 billion, with an outflow of $529 million. In 2023, the situation significantly improved, with inflows reaching $2.4 billion in six months and outflows totalling only $19 million.

Despite the wartime risks, investors are willing to invest in new Ukrainian projects. Polish logistics operator Laude relocated assets worth €100 million to Ukraine after closing its business in Russia and plans to increase investments. German company Pfeifer & Langen will acquire its sixth sugar plant in Ukraine and German company Bayer is investing €60 million to expand its facilities in the Zhytomyr region.

Allies have also been particularly supportive in encouraging Foreign Direct Investment,
“Bpifrance Assurance Export will provide insurance for French businesses investing in Ukraine, covering up to 95% of investor asset losses or debtor obligations. The main condition is active participation in Ukraine’s reconstruction before the end of the full-scale war.”

Advice for foreign businesses in Ukraine

Atamas advises leveraging the country’s investment incentives for foreign entities looking to invest in Ukraine, including substantial state support and tax exemptions.

“Investing in Ukraine can still be pragmatic even during wartime,” he asserts. The recovery process, he suggests, will be bolstered by international efforts like the European Commission’s Ukraine Assistance Fund and collaborations with firms like BlackRock and JPMorgan Chase in establishing a reconstruction bank to attract $400 billion.

Atamas believes that the government is also being assertive with incentives to tempt investors back into Ukraine, with “up to 30% state support for capital investment, infrastructure development, and corporate income tax exemptions for up to 10 years.”

Ukraine’s 10-year economic recovery plan

Despite the encouraging first signs, Atamas is clear that the road to recovery for Ukraine is still in its infancy. “In early 2023, the World Bank estimated Ukraine’s reconstruction and recovery needs at around $411 billion for the next decade. Ukrainian and international private companies are expected to contribute to infrastructure development and economic revival in Ukraine.

The European Parliament has supported the European Commission’s initiative to create a special Ukraine Assistance Fund of up to €50 billion. This fund is intended to provide stable and predictable financial support to Ukraine from 2024 to 2027, including direct grants, credits, mobilisation of private investments through guarantees and blended financing.”

Anticipated boom

There has been sobering scenario planning to shore up the economy whilst there is still active combat, Atamas describes the most likely as, “Active combat with Russia until 2025 with minimal front-line changes. In this scenario, Ukraine’s economy will continue to recover over the next two years, with modest GDP growth. However, the approaches to transforming the economy and creating conditions for foreign private capital to drive Ukrainian investment projects are currently being developed. An economic boom is expected from 2026 onwards.”

If you already doing business in Ukraine, or would like to expand into the region and would like to talk to one of our experts, please get in touch.