Despite Russia’s occupation of its territory, missile attacks on its infrastructure and the enormous human costs of the war, Ukraine’s economy has been impressively resilient. Its effective military resistance against a much stronger adversary is in fact underpinned by this successful economic management. Rather than face institutional sclerosis or even collapse, Ukraine’s state capacity has been strengthened by the conflict. Through a combination of tax revenue collection and substantial networks of voluntary fundraising, the state has dramatically increased the size of its armed forces, invested in defence production and maintained a decent level of public infrastructure.
State spending on soldiers’ wages, infrastructure and logistics – including public sector procurement from private firms – has had a positive knock-on effect, supporting demand in the civilian market economy. Soldiers on the frontline earn well above the national average wage. An innovative military industrial complex, combining traditional state-owned enterprises with an ecosystem of drone startups, has been developed. These policies have stabilised the Ukrainian economy and directed it to the goal of the country’s basic survival.
