Intensification of Russia's aggressive actions against the civilian population of Ukraine, continued destruction of the country's critical infrastructure, blockade of exports across the western borders, delay in the provision of partner military and financial aid and a number of other troubles called into question the possibility of a quick recovery of the economy in 2024, improvement of the well-being of the population and hopes for peaceful development of the country.

However, new scenarios of a collapse in the national economy did not come true, while positive signals:

— sufficient stability of prices and the exchange rate,

— a gradual increase in wages,

— a higher demand for labour and lower unemployment

"peacefully coexist" with such negative phenomena as:

— the low purchasing power of households,

— growing administrative and fiscal pressure,

— narrower space for financial manoeuvre in the social sphere.

Of course, such contradictions are not new or exceptional, and the mix of difference features of the socio-economic and socio-political situation is rather "usual". However, in the conditions of war and the need to start the recovery of the country (even before the end of hostilities), the tasks of correct assessment of the state and directions of the country's movement are strongly actualized.

At the end of April, the NBU released information on the balance of payments and the monetary sector of Ukraine in the first quarter of 2024, which made it possible to rationally assess certain important aspects of the country's development in that period. It should be noted that today, expert assessments of the state and dynamics of the domestic economic environment are highly controversial. Positive assessments rest on the fact that during 2023, the country showed its ability to quickly adapt to new attacks of Russian aggression, production indicators gradually improved, after falling by almost a third, and the exchange rate and price shifts were quite moderate (although few would be surprised, if crisis shocks occurred during aggression).

In order to more correctly determine the current socio-economic situation, it makes sense, first of all, to perform a comparative analysis of statistical and sociological indicators of comparable periods — and observations of the country's development at the beginning of 2024 in terms of economic shifts and possible prospects will have a rational basis if correlated with the same period last year, moreover that the beginning of 2023 was characterized by very (and even overly) optimistic expectations of the country's citizens regarding its socio-political development in the near future.

Specifically, at the beginning of 2023, social and psychological confidence in positive changes in the country went up, as evidenced by public opinion polls. An important question traditionally concerns the country’s movement in the right/wrong directions. After the start of Russia's full-scale aggression against Ukraine, the share of citizens who believed that events in Ukraine were developing in the right direction consistently increased, reaching the highest figures in February–March 2023 (61%), apparently, thanks to the successes of the Armed Forces of Ukraine liberating the country.Today, it should be admitted that last year's optimism regarding economic growth significantly weakened.

Regarding economic assessments, according to our observations, the competitive positions of the national economy, and therefore, the trajectory of its potential development find a "natural" reflection (integration capabilities, resistance to external pressure) in the balance of payments, in particular, the components of the current accounts. So, we shall first of all look at the foreign economic indicators of the first quarters of 2023 and 2024 (both characterized by a new aggravation of hostilities).

Changes in current accounts. The end of 2023 – the beginning of 2024, as we said, was marked by an increase in negative external pressures. In such conditions, the foreign trade environment naturally caused more and more concern, as the growth of external imbalances brought additional macroeconomic risks. Meanwhile, almost the opposite happened (table "Indicators of foreign trade"). Exports (both in goods and services) increased significantly, while imports decreased (that is, domestic exporters began to return to the niches that were lost with the beginning of the war).

So:

• the deficit of trade in goods improved from $5.9 billion to $5.6 billion,
• the deficit of trade in services improved from $3.6 billion to $1.4 billion,
• the deficit of foreign trade (in goods and services) improved by almost $2.5 billion.

Indicators of foreign trade in the 1st quarter, $ billion

Noteworthy, despite the difficulties with transportation of agricultural produce and foodstuffs across the western borders of Ukraine in the 1st quarter of 2024, the volumes of their export have actually not changed — they decreased by just about 4% ($6.78 billion in 2023, $6.48 billion in 2024). Moreover, the country managed to find new logistics routes for exports via Romania. So, we may expect that Ukraine's problems with agricultural exports will ease, which will make it possible to gradually increase commodity exports.

Another (somewhat unexpected, after new significant losses in power generation) news was an increase in metallurgy exports by 15%. It is clear that the industry's pre-war export volumes are unlikely to be achieved, but the repurposing of production in accordance with the EU "green transition" requirements will help increase export revenues or at least preserve the importers' markets.

The biggest improvement in imports occurred as a result of a significant reduction in funds for admission and serving Ukrainians (refugees and displaced persons) abroad: $5.57 billion in 2023, $3.71 billion in 2024. Of course, the majority of new immigrants already have enough information about new potential places of residence and mostly move at their own expense (if it’s not a flight but planned relocation).

Although the foreign trade deficit was reduced, it remains dangerously high. While the foreign economic situation can be partially balanced thanks to partner aid (table "Indicators of current accounts in the 1st quarter"), the situation here somewhat worsened.

Indicators of current accounts in the 1st quarter, $ billion

So, if under the item "Primary incomes" the balance remained practically unchanged (with a decrease in salaries though), under the item "Secondary incomes" the receipt of partner assistance and grants turned out to be lower than in 2023 by almost $3 billion. If the "shortage" were smaller, then the current account would probably almost break even.

However, the settlement of the deadlock with the US budget may improve the situation in the following quarters. In general, we are mainly talking about reducing the total partner aid to Ukraine, or its shift from grants to credits (such a process has already begun), so we estimate its level in 2024 to be somewhat lower, compared to 2022 and 2023 (under the item "Secondary income", $17–19 billion may arrive).

Thus, the statistical results of Ukraine’s foreign economic sector development in the 1st quarter of 2024 are largely cautiously optimistic. However, macroeconomic indicators do not show how the balance of payments affects household incomes. The population has its own views.

Public Opinion. As we mentioned, a central question that we used to examine the public opinion was about the correctness of the country's trajectory. Of course, the "correctness of the country's trajectory" is a very subjective concept, but the answer is usually based on political and economic factors. Before 2022, the answers to this question demonstrated a very critical attitude of Ukrainians to the development of the situation in the country (table "Are the events in Ukraine moving in the right or wrong direction?").

According to polls in the winter–spring of 2023, the share of those who answered that events were developing in the right direction reached all-time high (59–61%), and the share of those who believed that events were developing in a wrong direction fell to a minimum — 21–24%. However, since the summer, this indicator has been consistently worsening, and in the winter–spring of 2024, the answers were divided almost equally. Moreover, during the March 2024 poll, for the first time since the beginning of the invasion, the share of negative answers exceeded that of positive ones. At the same time, the share of those who were undecided reached the maximum level: almost every fourth person found it "hard to answer".

Are the events in Ukraine moving in the right or wrong direction?, % of responses

In general, now there are reasons to assert that the distribution of answers regarding the correctness of the country's movement is probably more determined by socio-political (primarily, the course of military operations) factors and components of the country's development and less — by the economic component. This is confirmed by a certain "difference" observed in the part of answers regarding the correctness of the trajectory and the well-being of households.

So, when assessing the well-being of one's family from the viewpoint of the purchases current incomes allow, after the start of full-scale aggression, the share of citizens who hardly make ends meet consistently (albeit insignificantly) decreased. Having decreased to 11% in September, 2023, it remained at the same level for six months. The same applies to the share of those who answer that they have enough money only for food and necessary inexpensive things (37-38%) (table "Assessment of the purchasing power of households"). Therefore, the level of poverty in the country (the share of those who spend almost all their income on food and essentials) has not changed during the past six months (48–49%) and is significantly lower than in the winter-spring of 2023. That is, there are reasons to say that citizens' self-assessment of their purchasing power shows some improvement.

Assessment of the purchasing power of households, % of responses

Moreover, a certain improvement in the purchasing power is confirmed by the financial indicators of households. Let's note the following socio-economic changes.

(1). The demand for labour in the country is growing noticeably. At the beginning of 2023, the need of employers for employees to fill official vacant positions was about 30 thousand, at the beginning of 2024 — more than 40 thousand. Therefore, the workload per vacant workplace decreased from 4–5 to 3. Note that this is not yet an unequivocal indication of the start of recovery processes. More likely, it reflects the personnel shortage due to the people’s participation in the defence of their Motherland, as well as the forced emigration of a significant part of the population (including able-bodied).

(2). The average salary in March 2023 was UAH 16.7 thousand, but according to our estimates, at the end of the first quarter of 2024 the average salary reached UAH 20 thousand, that is, its growth exceeded 20%. During this period (quarter to quarter), the consumer price index rose by 4-5%, that is, salaries increased not only nominally but also in real terms.

(3). Deposits of the population, which have also increased both in nominal and real terms, can also serve as evidence of an increase in household resources. Household deposits at the end of March 2023 totalled UAH 1,055 billion (UAH 646 billion — in the national currency). At the end of March 2024, they were more than 20% higher — UAH 1,220 billion (in the national currency — UAH 767 billion).

(4). Along with this, the activity of citizens on the cash currency markets has increased significantly. In the first three months of 2024, the population paid for the purchase of foreign currency from banks (mainly dollars, euros) more than three times more than in the same period of the previous year (diagram "Cash foreign currency bought/sold by individuals").

Cash foreign currency bought/sold by individuals, UAH billion

It is clear that foreign currency is often bought to acquire risk-free assets, support relatives and friends who have to stay abroad, buy a car, etc., but at the same time, this proves that the population has the appropriate hryvnia funds to buy foreign currency.

Final remarks. The two years of Russian aggression led to significant losses of the country's citizens, destruction of the economic and social environment. Fatigue and tension are growing, disappointment emerges, and doubts about the correctness of the chosen path have appeared. Public opinion polls testify to the gradual displacement of optimistic sentiments characteristic of the winter-spring period of 2023 with more restrained visions of the country's near future. We believe that a fundamental change in such attitudes will occur together with the successful repulsion of Russian aggression.

Along with this, the limited statistical data show a much more positive economic dynamics than we might expect, based on the results of public opinion polls. Many macroeconomic indicators point to (albeit insignificant) stabilization in Ukraine. We see preservation of the economic dynamics acquired in 2023 in 2024 as a good basis for a sooner recovery in the coming years.

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