Blog | 12 May, 2022

“Challenges in IT Will Begin Later.” What Is Waiting for the Ukrainian Economy, and How to Survive the Crisis?

IT is almost the only industry in Ukraine that operates at a close-to-pre-war level. But does it give grounds for restrained optimism? And what happens today in other sectors of the Ukrainian economy?

President of AMC Bridge, Igor Tsinman, and COO of the company, Vadym Synakh, contemplate on how quickly the business affected by the war can get back on track and why it is essential to save investments nowadays.

It’s too early to calculate losses

It is hard to comprehend the scale of losses in the Ukrainian economy. But the AMC Bridge co-founders say that restructuring into the war economy multiplied by the factor of hostilities in our country and the destruction of many important industrial centers and transport networks is quite evidently the reality in which we have to live today.

The Ukrainian economy has lost in key spheres. The most affected industries include metallurgy, agriculture, and mechanical engineering. Also, imports and exports have suffered due to transport routes disruption.

“What continues working is the digital part of the economy, finance sector in some way as it is mostly digitalized. Small business goes on operating where it is possible. And I think that these are the whales that hold the economy nowadays and will directly handle military needs. We are talking about services for transportation, equipment and infrastructure repair, supplying, logistics, and so on,” says President of AMC Bridge, Igor Tsinman. “It is hard to anticipate what the effect on the economy might be. There are different estimates: from 30 to 50 percent of the budget cut. Analysts talk about that, and it’s evident that such losses will be very noticeable.”

“When the war ends, we’ll have a different economy”

“The entire system will be restructured, and it is already happening. When the war ends, we’ll have a different economy—a restoration economy. It’s still hard to give detailed prospects regarding industries that can get back on track faster and industries that will need more time for that,” says Igor.

First of all, the restoration will depend on how long active hostilities will last. Still, COO of AMC Bridge, Vadym Synakh, assumes for now that the agriculture capacity will recover relatively quickly.

“All in all, the land will not go anywhere. And besides, we can count on the simplification of export restrictions for Ukrainian products that existed before. That’s why everything is quite optimistic here.”

On the other hand, the prospects of the mechanical engineering industry look extremely pessimistic. The main exports of such industries were directed to russia, belarus, and other former Soviet Union countries. And it is useless to hope that enterprises that are now destroyed to a large extent will be restored in the same condition. They will be replaced by new ones, but it will take much time.

As for another key industry for Ukraine, metallurgy, the restoration of the operating capacity of enterprises located mainly in the east of the country and destroyed today is a lengthy and costly process. But here, we can expect significant investments.

Small and medium business is one more economy branch that was well developed. But there is an important point here. “When they say that the budget will be decreased by some percent, we should not forget that a significant part of Ukrainian business was in the shadows. Those are dozens of percent of the country’s economy that worked past the budget. And that part is likely to recover most quickly. The main thing here is not to bring too much of regulations and not to approve laws that will hinder rather than help. So far, it seems that the authorities are tolerant of such processes,” says Vadym Synakh.

But the high-complexity task for the Ukrainian government will be to convince investors that their money is protected. Eventually, it is an investment that drives the economy. The potential membership of Ukraine in the EU plays an important role here. After all, it is not only financial assistance from the EU member states but also strict requirements. Among other things—the requirements for regulating laws and the legislative framework related to the protection of private property, investments, and copyright.

The IT crisis hasn’t happened yet, but the tailwind will weaken

“Now we witness a unique situation when the sphere that is aimed at exports and makes money has suffered minimally due to such horrific events. But as for the future prospects, they are complicated. On the one hand, the demand for services provided by the Ukrainian IT industry is growing. At least, in connection with the exclusion of the russian and belarusian markets,” indicates Igor Tsinman.

On the other hand, it’s IT that will feel the crisis consequences in a while. “The thing is that it’s one of the sectors in which risks will be taken into account. And since we are doomed to border on russia, the political risks remain. And they will be considered at planning long-term relations in the digital economy,” Vadym Synakh supposes.

Now about the positive side. Igor Tsinman says that the way the IT industry has reacted to the war reassures all market players to some extent.

“I’m knocking on wood because the failure has not happened. Our clients have stayed with us and consider a certain expansion of cooperation. Although, everything goes with more difficulty. So, we can assume that there will be a tailwind and headwind.”

“I predict that development will still take place, but it will be slower than before the war. And it seems to me that the growth of salaries in the Ukrainian IT market will somewhat slow down. That’s because our potential orders flow to India, Southeast Asia, Egypt, Tunisia—the countries where labor has always been cheaper than in Ukraine. Yes, the quality is worse, but there is no war,” adds Igor.

All those factors affect Ukrainian IT today and will continue to affect it after the war. Igor supposes that we have yet to find what is the weighting for each of them. But it is clear that challenges in the IT industry will begin later, not now. And the negative trends are likely to be felt for several years after the end of the war.

Another challenge that the IT sector will have to take is the probable shortage of qualified specialists. “Traditionally, the largest centers for training technical specialists were Lviv, Kyiv, and Kharkiv. Even before the war, we felt problems with training programmers. And today, we can state that educational institutions in Kyiv and Kharkiv have been severely damaged due to military activities,” says Vadym Synakh. “And here, significant problems are expected with the educational process restoration. But there is a chance that the situation will become an impetus for doing something new. And we can hope that it will be much more effective than the education we previously had, which was approaching a hardly acceptable level, frankly speaking.”

Keep common sense and learn to make decisions

If you can donate to charity or help raise money to equip even one fighter, that’s great. Just like when you buy groceries at a local store, have a cup of tea at a coffee shop near your house, or bake bread for the military in your free time. It’s always better than doing nothing. And it really has a positive effect on the economy.

Another simple piece of advice from Igor Tsinman: do not go to extremes. Both excessive optimism and utter pessimism are equally dangerous now. “The game is not over, but manna from heaven will not come upon us. Therefore, all should look for where to come in handy and how to take care of the family, loved ones, and themselves. You should always look at the world with your eyes wide open. For example, it would be unwise not to have cash for emergencies, but it is just as pointless to withdraw all savings from the accounts and put them under the mattress. There must be common sense in everything,” remarks Igor.

“You have to understand that there is no hypothetical person who will solve your private problems for you. Such people solve big issues, and on a personal level, you have to make important life decisions yourself. Of course, you need to listen to what others say but also understand that now not only your future but literally life depends on your decision. Those are realities. Making complex decisions cannot be delegated. Society and each individual need to grow up quickly. And it is not about age, but about attitude, paternalism when we think that we can just go with the flow,” says Vadym Synakh.

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