There was a big hole in producing national-level information that seize the extent of financial exercise in Ukraine within the first half of 2022. As Russia’s invasion continues to ravage many elements of the nation, the circulate of official statistical information has been erratic. This lack of knowledge and the continued struggle enhance the problem of assessing Ukraine’s post-war restoration wants (Becker et al. 2022).
Respondents to the State Statistical Service of Ukraine surveys have been allowed to postpone their reporting through the interval of martial legislation. For instance, month-to-month sectoral output information and information on enterprise payrolls haven’t been reported since February 2022. These units of indicators are required in setting up nationwide output estimates below normal aggregation fashions employed by financial forecasters.
Enterprise surveys have been restricted of their statistical worth as a consequence of geographic and sectoral gaps. The struggle has created further issues. For instance, the month-to-month enterprise sentiment survey by the Nationwide Financial institution of Ukraine was interrupted for the vital months of March to Might (NBU 2022) and, consequently, it now factors to a basic pattern relatively than particular and comparable ranges of financial exercise.
Use of different information that might present good proxies for financial exercise in regular instances has grow to be inappropriate in struggle instances. Particularly, information on value-added tax (VAT) couldn’t be translated into gross sales estimates as companies have been allowed to modify right into a no-VAT regime in March 2022. Electrical energy consumption, which is one other proxy for financial exercise, has additionally grow to be unavailable as energy load information has been made secret initially of the struggle.
Researchers have explored new approaches to proxying financial exercise in Ukraine, for instance by using social media information (Constantinescu et al. 2022). Nevertheless, social media utilization would possibly change dramatically amid seismic occasions just like the Russian invasion, which makes these information a loud proxy. Additionally, social media is usually used for non-business causes, blurring the hyperlink between its utilization and financial exercise.
We suggest one other methodology for gauging personal consumption, utilizing micro-level financial institution card information. The advantage of this methodology is that it has uninterrupted circulate of data, and information come from virtually all Ukrainian areas, together with areas the place normal information assortment methods are suspended.
We begin by describing the extent of disruption throughout Ukraine, to provide us the minimal benchmark for fall in consumption. We then report extra exact estimates, whereas acknowledging some seemingly biases within the estimation.
Territories affected by struggle
The best back-of-the-envelope estimate within the absence of dependable statistical or enterprise survey information is mapping out the territories most affected by struggle actions and over-imposing these affected areas and the severity of injury with their position in nationwide output. This estimate permits us to quantify the direct war-related burdens to the financial system. The strategy has limitations as there are oblique hits to the financial system just like the naval blockade of Ukrainian exports (Blinov and Djankov 2022a). It therefore offers a decrease estimate of the destructive financial penalties of the struggle.
We make use of this territorial methodology by investigating the eleven Ukrainian areas which have witnessed important presence of Russian navy energy (desk 1). Utilizing official authorities information on struggle actions, we estimate the extent of occupation and injury by assigning weights. The darker the color, the stronger the destructive impression on financial exercise. As an illustration, areas coded black noticed a lot of their territory occupied by Russian navy forces within the respective month. White color doesn’t imply ‘no struggle’, as all Ukrainian areas undergo from aerial assaults and may even see clashes in some areas (like Dnipro or Odesa, not current on this desk). Quite, it signifies that there aren’t any important troop actions on the bottom.
This calculation leads us to conclude {that a} third of the Ukrainian financial system ceased working in March 2022, after which counter-advances of the Ukrainian military within the north halved this share to 15-18% in April after which additional decreased it to a median of 13% in Might and June.
Desk 1 Warfare-battered areas by months of 2022 and struggle severity (% of GDP)
Supply: State Statistics Service of Ukraine, authors’ estimates.
Nevertheless, consumption has decreased even in geographical areas in a roundabout way invaded by Russian troops. Accelerating inflation, lack of jobs, alternate charge actions all act to depress financial exercise. Which means the bottom-line figures above symbolize sensible higher limits for personal consumption estimates: precise decline figures are extra dramatic.
Financial institution card transactions
We make use of financial institution card exercise information as a proxy for personal consumption. Particularly, we use month-to-month level of sale (POS) transaction information from Alfa-Financial institution, considered one of Ukraine’s largest personal industrial banks. The info present the precise location the place a purchase order is made. As of Might, these information have been according to financial institution card transactions reported by Privatbank, Ukraine’s largest financial institution (Privatbank 2022). The latter offers some consolation as to the robustness of our estimates for the 2 banks collectively account for over half of the POS market.
The deleterious results of the struggle are simply discernible within the information. Financial institution card funds fell by half in March, the trough of the war-induced demand decline in Ukraine. A restoration in transactions quantity was seen in April and Might, and by June transactions volumes stabilised at round 75% of their pre-war month-to-month stage. When adjusted for seasonality and inflation progress over the interval, this estimate corresponds to a 40% lower (Determine 1).
We additionally plot information for the pandemic-affected first half of 2020 to check the relative depth of the struggle disaster in consumption with the earlier droop, additionally brought on by exogenous elements. In 2020, retail gross sales, adjusted for seasonality and inflation, surpassed their 90% pre-shock stage by June, reflecting swift restoration from the lockdown.
Determine 1 Retail gross sales traits of 2020 and 2022 (January = 100)
Supply: State Statistics Service of Ukraine, authors’ estimates based mostly on micro-level financial institution transactions information.
The sample is completely different through the struggle. When seasonal and worth changes are made to the pattern estimates, it seems that the second quarter of 2022 plunge in client demand was 3.3 instances deeper than through the preliminary COVID-19 lockdown in 2020. Family consumption dropped 9.3% year-on-year within the second quarter of 2020. Nevertheless, making use of POS-derived coefficients, personal consumption declined by round 30% within the second quarter of 2022, plateauing by June 2022 at round 70–74% of consumption relative to the earlier yr’s ranges.
The pattern has been uneven for varied bundles of consumption. Whereas whole nominal POS gross sales in June recovered to stay just a little larger than their 75% pre-war stage (Determine 1), a few of their contributors already surpassed their pre-war factors, whereas others are nonetheless at lower than half of their pre-war values (Determine 2). Meals purchases at supermarkets have remained relatively secure. On the similar time, gross sales of clothes and sneakers demonstrated quick restoration, whereas gross sales of leisure providers (cinemas, bars, and so forth.) and eating have remained depressed.
Determine 2 Alfa-Financial institution POS gross sales by key sectors in 2022 (January = 100, non-adjusted)
Supply: Authors’ estimates based mostly on micro-level financial institution transactions information.
Notes: no seasonal and worth changes.
The usage of financial institution card transactions information as a proxy for consumption has limitations. As an illustration, Ukrainian households are inclined to withdraw more money throughout crises after which make funds with that money. This consideration makes POS-based consumption estimates conservative, significantly for March and April 2022, when a lot money had been withdrawn after which supposedly returned to banks by way of varied distributors. It’s also value noting that POS as a fee methodology has completely different penetration ranges in large cities and small cities, with consumption within the latter being extra cash-driven. These two biases are inclined to work within the route of constructing the estimate extra conservative and thus serving because the higher certain of the personal consumption fall.
In abstract, these aggregated micro information recommend that personal consumption in Ukraine fell to half its pre-war stage in March 2022. Within the second quarter, it recovered to 70%, whereas month-to-month breakdown signifies that personal consumption then plateaued by June 2022 at 70-74% of its previous-year stage.
These micro-data estimates of personal consumption are considerably affected by the destructive results of the struggle as a result of giant refugee wave that adopted the beginning of hostilities (Blinov and Djankov 2022b). There’s a statistical problem for estimating consumption of these over 5 million Ukrainians who fled the nation and haven’t returned but. They’re nonetheless Ukrainian shoppers, although their consumption counts as imports for the needs of calculating nationwide accounts. The return residence of those Ukrainian residents is prone to enhance consumption and transfer it away from the present plateau.
Conclusions
The micro-data strategy to estimating personal consumption through the struggle in Ukraine exhibits a dramatic collapse after which some restoration, to 70–74% of its previous-year stage. The restoration has some similarities with the trail within the aftermath of the COVID-19 pandemic, albeit from a a lot deeper trough and at a a lot slower tempo, as a result of apparent distinction within the nature of the 2 crises. Particularly, the distinction between the 2 occasions is the massive refugee wave, which has not but subsided and creates important uncertainty in regards to the future restoration pattern. These first estimates recommend that Ukraine would possibly certainly be poised for a gradual restoration path (Blinov and Djankov 2022c).
The usage of micro information could also be warranted in calculating different elements of nationwide accounts too, for instance internet exports and authorities funding. For the previous, financial institution card information from Ukrainian refugee accounts can enhance the import estimates, whereas information from public procurement contracts can make clear authorities funding (Bosio et al. 2022). These estimates are solely imperfect substitutes for normal authorities statistics, which hopefully return to regular manufacturing within the close to future.
References
Alfa-Financial institution (2022), “Personal consumption restoration slowed down in June”, 5 July (in Ukrainian),.
Becker, T, B Eichengreen, Y Gorodnichenko, S Guriev, S Johnson, T Mylovanov, Okay Rogoff and B Weder di Mauro (2022), “A Blueprint for the reconstruction of Ukraine”, VoxEU.org, 7 April.
Blinov, O and S Djankov (2022a), “Restarting Ukraine’s Agricultural Exports,” VoxEU.org, 10 June.
Blinov, O and S Djankov (2022b), “Ukraine’s Deepening Inhabitants Problem,” VoxEU.org, 28 June.
Blinov, O and S Djankov (2022c), “Ukraine’s Restoration Problem,” VoxEU.org, 31 Might.
Bosio, E, S Djankov, E Glaeser, and A Shleifer (2022), “Public Procurement in Regulation and Follow.” American Financial Evaluation 112 (4): 1091-1117.
Constantinescu M, Okay Kappner, N Szumilo (2022), “Estimating the short-term impression of struggle on financial exercise in Ukraine,” VoxEU.org, 21 June.
NBU (2022), Month-to-month Enterprise Outlook Survey, Nationwide Financial institution of Ukraine, June.
Privatbank (2022), “Client market restoration: In Might, Ukrainians bought extra meals and home equipment, visited cafes and eating places and paid with playing cards”, 16 June (in Ukrainian).
