Ukrainian business going strong despite Russian military buildup near border and looming threat of invasion
World markets have not yet responded dramatically to the threat of a Russian invasion of Ukraine, with the risk of a potential invasion being perceived by the markets as low, Vasyl Tofan, a senior partner at Horizon Capital investment company, has told NV.
Despite alarming headlines in the world press, the situation on the capital market looks quite stable, added Tofan. The Ukraine 5Y CDS index plummeted in 2018. Later it skyrocketed in March 2020, triggered by the COVID-19 pandemic and military crisis on the Ukrainian border.
“Now you can see the index going down,” said Tofan. “A response to recent events is apparent – insurance prices have increased but the surge is nothing in comparison to last spring’s figures. Basically, despite all the breaking news, the world markets seem to be reacting calmly. It looks like a potential escalation of the conflict in eastern Ukraine is being dismissed as unlikely.”
Tofan said there had been a consumption boom in Ukraine in the last few years.
“Although consumption growth has slowed down in the last months, the figures are still at a record high,” he said. “The high prices and demand for Ukraine’s main exports, such as metals, ore, food products and IT, are the driving force behind this trend.”
Tofan said that in spite of the lack of stability, the biggest risk at the moment is Ukraine’s increasing inability to retain talent, along with salary growth.
“This has already been seen in western and central European countries, where unemployment rates are unprecedentedly low,” he said. “It will still take Ukrainians some time to get used to the new normal.” said Tofan.
He said that Ukraine, along with other post-Soviet states, is now reaping the benefit of its greatest demographic dividend. Ukraine’s largest generation, born in the 1980s has reached its productivity peak.
“The biggest challenge we are facing is that the next generation of workers, who are now in their 20s, is much smaller, due to the sharp drop in the birth rate in the 1990s,” said Tofan.
He said it was vital for Ukraine to make the most of its current demographic dividend and accelerate its productivity surge.
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