Ukraine Market Report — Q3 2020
A recovery beginning as restrictions eased, a harvest completed normally, and a divergence between the sectors the pandemic damaged and those it accelerated that turned out to be permanent.
Overview
Restrictions eased and activity recovered through the quarter. The harvest was completed normally.
The pandemic's sectoral effects had by this point sorted into a pattern that proved durable.
What the pandemic accelerated
IT services. The sector grew rather than contracted. Global demand for remote technical capacity rose sharply, and Ukrainian firms were already structured for remote delivery to foreign clients. The pandemic normalised distributed teams in industries that had previously insisted on physical presence, which permanently expanded the addressable market.
E-commerce and delivery logistics. Adoption that would have taken years happened in months, and the behaviour persisted afterwards.
Digital public services. Ukraine's government digitalisation programme benefited from a period in which physical service delivery was restricted, and usage rose accordingly.
What it damaged
Hospitality, physical retail, transport and anything dependent on movement or gathering. Some of that recovered; some did not.
The general observation
A shock of this kind does not slow an economy evenly. It accelerates trends that were already underway and terminates activities that were already marginal.
Almost nothing that grew in 2020 was new — remote services, e-commerce and digital government were all growing before. The pandemic compressed several years of adoption into several months.
For a company, the useful reading is that a disruption of this type is a test of which side of a structural trend you are on. Firms positioned with the trend gained years; firms positioned against it lost the same years.
Macro position
Recovery from the second-quarter trough. Inflation low but beginning to rise. Currency stable. Reserves adequate.
Sectors
Agriculture — a normal harvest, unaffected.
IT services — the pandemic's clearest beneficiary.
Retail — recovering, with the channel mix permanently shifted toward online.
Metals — recovering with global demand.
What the quarter settled
That the pandemic's lasting economic effect in Ukraine was compositional rather than aggregate — the same output produced by a different mix of activities.
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