Signs of Resilience and Resurgence in Ukraine

wo years on from the start of Russia’s full-scale invasion, the Ukrainian business community is actively reshaping the country’s narrative to attract investments and promote deal-making, moving away from its war-torn image and global economic uncertainties.

Significant civilian casualties and extensive damage to infrastructure and productive assets in 2022 meant traditional players in sectors like metallurgy, agriculture and retail faced reduced investment potential, prompting a shift toward the IT sector.

However, the Ukrainian economy has shown signs of recovery. GDP grew by approximately 5% last year and there has been a gradual return of investment interest. The National Bank of Ukraine’s monetary policy of maintaining a stable exchange rate has also helped stabilize prices and inflation, fostering increased consumer confidence and higher retail turnovers.

This rebound underscores the Ukrainian economy’s resilience, supported by crucial military and monetary assistance provided by international allies. Several industries have emerged as potential powerhouses for Ukrainian reconstruction:

• Information & Communications Technology: Experiencing relatively less impact, IT has emerged as a driver of economic growth. Representing 40% of Ukrainian service exports, IT was the sole industry to actually see a rise in revenue in 2022–2023. Notable domestic and international investment interest, such as the Horizon-led funding round in education platform Preply as well as Mythical Games’ acquisition of blockchain gaming marketplace DMarket, exemplifies IT’s role as a driving force in the Ukrainian investment market.
• Agriculture: Despite challenges, strong agricultural yields and favorable weather conditions have helped compensate for arable land losses. Agriculture remains a major contributor as the country’s leading export industry and Ukraine is still a top-three supplier of agricultural products to the EU. Investment in storage and port facilities by companies such as Kernel shows Ukrainian companies prudentially planning for the future, while Fairfax Financial’s consolidation in egg product company Ovostar Union represents improving confidence in this sector.
• Energy: Ukraine’s energy sector has also seen improved developments in exceptionally difficult circumstances. The dedicated efforts of workers from DTEK and Ukrenergo have helped maintain Ukraine’s power grid, eradicating the power deficit and even achieving electricity surpluses. Significant investments in energy, including a record-breaking UAH20 billion by DTEK, have helped supplement existing capacities, diversify energy resources, and enhance energy security.
• Transport and Infrastructure: Transport has played a pivotal role in economic recovery, with the unblocking of exports through seaports being a critical factor in reducing logistical costs and restoring supply lines. In addition to major investment in warehouses and terminals to harden logistical capacity, projects like the USAID-Ukrainian Railway agreement, integrating Lviv into the Trans-European transport network, contribute to an overall economic rejuvenation. Meanwhile, seaborne exports through the Black Sea corridor now benefit from EBRD-backed war-risk insurance which encourages increased trade through this vital route.
• Real Estate and Construction: The success of the NBU’s monetary policy has contributed to a surge in demand. Adjusting to their new “normal,” Ukrainian citizens have driven greater retail activity, increasing turnover. The market has subsequently responded to this recovery, primarily characterized by increased investment in business centers and shopping malls. EBRD support for the M10 Lviv Industrial Park project shows positive momentum in real estate and construction, with high potential for strong demand in 2024 fueled by international interest in reconstruction and restoration.

Furthermore, the Ukraine Development Fund (established with backing from leading U.S. investment firms BlackRock and JPMorgan) shows that Ukraine is already thinking ahead and is ready to rebuild. These endeavors underscore Ukraine’s commitment to overcoming challenges, increasing manufacturing, securing exports and fostering new investment opportunities, setting the stage for improved investor confidence as the country looks forward to 2024.

The economic outlook for Ukraine is still shaky, but history teaches that countries under pressure with a highly motivated and educated population can achieve amazing economic results. 

The Life Sciences Sector in Ukraine in Times of War

Before the Russian invasion two years ago, Ukraine was an important provider of high-throughput screening (HTS) compounds and played an important role in clinical trials.

As documented by the NIH and other sources, Ukrainian fine chemical companies such as Enamine Ltd and Uorsy or the fine chemical platform Chemspace are important actors in HTS compounds, which are essential for drug discovery. These compounds are critical to the pharmaceutical industry as they enable the rapid screening of thousands to millions of chemical compounds for biological activity, playing a key role in the efficient identification and validation of new drug targets. In the early days of the conflict the disruption of production and logistics provided challenges for drug discovery and development.

The conflict in Ukraine has also disrupted the country’s important role in cancer clinical trials. Before the war, Ukraine participated in a large number of randomized clinical trials in oncology. Since the war started no new trials have been started in Ukraine. Existing trials, however, were not disrupted.

According to a recent study from the Swiss Federal Institute of Technology in Lausanne, 18% of Ukraine’s scientists have fled due to the war and research capacity is down 20% . This is particularly difficult since Ukrainian life sciences companies and hospitals occupy relevant links in the entire drug discovery and development process.

However, as noted elsewhere in this article, the Ukrainian economy has shown signs of recovery. Several industries have emerged as potential powerhouses for Ukrainian reconstruction, in particular IT and life sciences. In the life sciences sector, Ukrainian enterprises, researchers and hospitals have proven to be resilient and looking for solutions to cope with difficult situation. Clinical research organizations (CROs) which have been active in the Ukraine are making efforts to resume clinical trials in Ukraine, particularly in relatively safe cities such as Lviv. In the HTS arena, international collaboration is picking up: Late last year U.S. group Recursion and Enamine announced a partnership to generate enriched screening libraries for the global drug discovery industry.