The COVID-19 pandemic has proven to be a global risk on many fronts other than health. As lockdowns extend and new variants claim dominance, countries are finding it challenging to fight poverty. In the east, the impact of COVID-19 on poverty in Ukraine could reverse multiple years of joint efforts for the country to gain economic stability. In response, the Ukrainian government is taking action to boost domestic economic value while the World Bank is offering loans to help eliminate the harsh effects of the pandemic on Ukraine’s impoverished.
Ukraine Before COVID-19
At the end of 2019, Ukraine was well on its way to creating stable economic infrastructure with its unemployment rate reaching a five-year low of 7.3%. Respectively, Ukraine’s employment rate topped 69% at the end of 2019, the highest it has reached in more than 25 years. Aside from employment security, Ukraine had seen constant growth in year-on-year comparisons of its GDP from 2016-2020, averaging 2.8% growth per quarter.
How COVID-19 Could Increase Poverty in Ukraine
Although the post-Soviet nation had 43.2% of its population living below the poverty line in 2018, UNICEF has projected that the rate of those in poverty in Ukraine will increase by 5% by the end of 2021. Additionally, Ukraine’s employment rate has dropped steadily throughout 2020, starting at 67.9% and reducing to 64.3% in the last quarter of 2020. Astonishingly, after the first quarter of 2021, employment rates in Ukraine dropped to 55%.
As of October 2020, the UNOCHA reported that 80% of Ukrainian households ended up with reduced income. Subsequently, unemployment rates in Ukraine have risen to 10.5% in the first quarter of 2021. Contextually, the highest it has reached since the annexation of Crimea in 2014.
Despite the impacts of COVID-19 on poverty in Ukraine, the country has increased its GDP by 5.4% in the second quarter of 2021, Ukraine’s largest GDP growth rate in 10 years and its first-period growth since the beginning of the pandemic in early 2020. National legislation and loans from the World Bank are major contributing factors to this growth.
Ukraine’s “Adaptive” Lockdown
While cases surge in Ukraine, the country is panning out to be one of the hardest-hit nations in Europe with more than two million confirmed cases. As of early August 2021, the government ordered a strict lockdown until October 1, 2021, in hopes of minimizing any future impact from COVID-19 on poverty in Ukraine. The adaptive lockdown measures allow regions to either ramp up or loosen lockdown restrictions depending on the number of cases in the area.
World Bank Loans
The World Bank loaned the Ukrainian government $150 million in April 2020, $300 million in December 2020 and $100 million in May 2021. The loans respond to the impact of COVID-19 on poverty in Ukraine in accordance with the Ukraine Access to Long Term Finance Project.
The funds will help strengthen social safety nets such as Ukraine’s Guaranteed Minimum Income Program (GMI) and provide loans to small and medium-sized businesses. This will help build programs and projects that assist in fighting poverty and prevent further COVID-19 impacts.
The Ukrainian Government’s Measures
The Ukrainian government temporarily amended trade laws to allow imported goods into the country at a cost-effective rate in order to combat COVID-19. The legislation is waiving the value-added tax (VAT) which ends up on every imported item entering the country. This will reduce costs for equipment and goods imported, including medical devices, services and vaccines.
Ukraine is also making progress in vaccinating its population. On August 16, 2021, more than 100,000 Ukrainians received vaccinations, bringing the nation’s total of vaccinated citizens to 4.75 million people.
The impact of COVID-19 on poverty in Ukraine has impacted its stability significantly. However, with assistance and domestic cooperation, the nation of Ukraine is fighting back.
– Ali Benzerara