Frontline regions face the most challenging conditions for reconstruction — NBU
The full-scale war has significantly altered the economic situation in Ukraine’s regions and exacerbated imbalances between them. Frontline and border regions have suffered the greatest losses, according to the National Bank of Ukraine. At the same time, western regions have become the main hubs for the relocation of businesses and the workforce.
This is detailed in a new study by the National Bank of Ukraine.
How the War Has Changed Ukraine’s Economic Landscape
The National Bank of Ukraine analyzed how the full-scale war has altered the development trajectories of the country’s regions. The study is published in one of the thematic boxes of the NBU’s new Inflation Report.
According to the regulator, the gap in economic activity levels between regions has widened significantly over the years of the war. The closer a region is to the combat zone, the greater the losses it has suffered and the slower its recovery.
The NBU has identified four groups of regions based on the level of destruction and security risks:
- frontline regions—have suffered the most extensive destruction;
- border regions — regularly suffer from cross-border shelling;
- conditionally border regions—do not share a land border with Russia but remain in a high-risk zone due to a large number of critical infrastructure facilities;
- rear regions — do not border Russia or temporarily occupied territories. At the same time, western regions have become the main hubs for the relocation of businesses, capital, and labor.
The National Bank notes that the dynamics of economic activity effectively mirror the map of destruction. Following a sharp decline in business expectations in February 2022, regions began to recover unevenly. The decisive factor was not the economic situation, but proximity to hostilities.
According to the NBU’s estimates, the greatest risks remain for frontline and border regions. It is these regions that may enter the post-war reconstruction phase with the weakest starting conditions due to widespread destruction and an exhausted economic base.
The regulator emphasizes that physical reconstruction alone is insufficient to prevent the formation of depressed areas. State policies aimed at repopulating these areas, developing risk insurance mechanisms, and attracting investment to the most vulnerable regions are also necessary.
The NBU announced that it will support the recovery of affected regions by ensuring macrofinancial stability and developing lending. The regulator noted that thanks to the implementation of the Lending Development Strategy and more targeted state support, lending rates in frontline regions have already matched those of other regions since mid-2024.
The National Bank added that the issue of regional economic recovery will remain a focus for the regulator.
The dollar and euro rose; NBU exchange rates as of May 19.
The NBU updatedits exchange rates: the dollar and euro fell, while the zloty rose.
As a reminder, the National Bank of Ukraine set the official exchange rates for Friday, May 15.
Pyshnyy stated that the amount of cash in circulation in Ukraine has decreased.
