ADAPTIVE CAPACITY OF THE UKRAINIAN ECONOMY IN THE FOURTH YEAR OF THE RUSSIA–UKRAINE WAR

Abstract

This article examines the adaptive capacity of Ukraine’s economy in the fourth year of Russia’s full-scale war. The study highlights the unprecedented challenges arising from massive destruction of infrastructure, human losses, labor migration, and critical budgetary pressures, which collectively threaten macroeconomic stability. The research aims to provide a comprehensive assessment of macroeconomic stability, fiscal policy, financial sector performance, and sectoral resilience, while identifying the key drivers and risks influencing Ukraine’s economic sustainability. The findings show that macroeconomic stability has been preserved primarily due to strict monetary policy by the NBU, including interest rate adjustments, foreign exchange interventions, and inflation control measures. Financial institutions have managed to maintain lending activity and deposit growth, supported by subsidized credit programs and strong public trust in the banking system. Fiscal policy has prioritized defense spending, resulting in record-high budget deficits and a debt-to-GDP ratio exceeding 90%, with civilian expenditures heavily reliant on international aid. Investment policy faces severe wartime risks, yet Ukraine continues to attract external financing through international guarantees, war risk insurance mechanisms, and cooperation with global financial organizations. The agricultural sector, IT industry, and renewable energy remain the most resilient and strategically important sectors, while defense industry development and infrastructure reconstruction represent prospective growth areas. Key factors of resilience include the NBU’s prudent monetary strategy, adaptive fiscal policy, banking sector stability, and extensive external support. However, major risks persist: dependence on foreign financing, critical public debt levels, destruction of productive and energy infrastructure, demographic decline due to migration and casualties, and geopolitical uncertainty affecting external support and trade conditions. The article concludes that ensuring long-term economic sustainability requires diversification of financing sources, development of domestic savings markets (pension funds, insurance companies), digitalization of public services, and comprehensive reform of state financial management. Finally, effective reintegration of displaced persons and return of labor migrants are crucial for preserving human capital and supporting future recovery. Thus, Ukraine’s economic prospects depend on a combination of internal reforms, sound economic policy, and continued international solidarity.