The Ukraine War has been raging for over 5 years now. In that time, it has taken a heavy toll on the Ukrainian economy. Government spending on the war effort has sucked up valuable resources that could have been used to fund much-needed social programs or to bolster the country's infrastructure. Meanwhile, international sanctions have cut off Ukraine from vital trading partners, further exacerbating the country's economic woes. Here is a closer look at the economic effects of the Ukraine War.
Government Spending on the War Effort
One of the biggest economic effects of the Ukraine War has been the massive amount of resources that have been diverted to fund the war effort. In 2016 alone, military spending accounted for nearly 5% of Ukraine's GDP. That is an enormous amount of money that could have been used to improve the lives of ordinary Ukrainians had it not been funneled into the war effort.
In addition to diverting resources away from social programs and infrastructure projects, government spending on the war has also put a strain on public finances. Ukraine's national debt has ballooned in recent years and now stands at over 60% of GDP. This is in large part due to increased government borrowing to finance the war effort. As a result of all this increased spending, Ukraine's budget deficit reached a record high of 7% of GDP in 2016.
International Sanctions Cut Off Vital Trading Partners
Another major economic effect of the Ukraine War has been international sanctions against Russia, which have cut offUkraine from one of its vital trading partners. Prior to 2014, Russia was Ukraine's second-largest trading partner after only Germany. However, since then relations between the two countries have deteriorated sharply due to Russia's annexation of Crimea and its ongoing support for pro-Russian separatists in eastern Ukraine. In response to these aggression, several Western countries including the United States and European Union have imposed sanctions against Russia.
These sanctions have had a significant impact on bilateral trade between Russia and Ukraine. According to data from Ukraine's Ministry of Economic Development and Trade, bilateral trade turnover between Russia and Ukraine fell by nearly 50% between 2013 and 2017. This decline in trade has had a negative effect on both countries' economies but has hit Ukraine particularly hard given its already precarious economic situation.
The economic effects of the Ukraine War have been far-reaching and devastating for the country. Government spending on the war effort has diverted valuable resources away from social programs and infrastructure projects while increasing public debt. International sanctions have cut off vital trading partners, further exacerbatingUkraine 's economic woes . It remains to be seen how much longer Ukraine will be able to sustain such heavy economic losses .