Ukraine Market Report — Q3 2024
A harvest exported normally through a corridor now operating at scale, and a labour market where the constraint had become absolute rather than merely tight.
Overview
The harvest was exported through the maritime corridor without the constraints of the previous two years. Volumes for the year approached pre-2022 levels.
Labour shortage had by this point become the economy's dominant operating problem.
The labour position
The archive first recorded labour as a binding constraint in 2017. By 2024 it had become something different in kind.
Three factors compound. Millions of people are abroad, and the longer they remain the less likely their return becomes as children enter schools and households establish themselves. A large share of working-age men is mobilised. And the demographic base was already shrinking before either of those.
The practical effect in this quarter was that vacancies in construction, transport, engineering and manufacturing could not be filled at any wage a business could pay and remain viable.
The responses available are limited and all of them are slow. Automation, where capital allows. Recruitment of workers who had not previously been in these occupations. Training of older workers. And, increasingly discussed, immigration.
None of these closes the gap in the near term. The labour constraint is the variable that will determine what any reconstruction programme can actually build, and it is not responsive to financing.
Macro position
Growth continuing but below the previous year. Inflation rising. Managed exchange rate flexibility. External financing in place on a multi-year basis.
Sectors
Agriculture — a normal export season.
Construction — demand exceeding capacity, constrained by labour.
Energy — repair and import ahead of winter.
IT services — growing, and continuing to absorb technical graduates.
What the quarter settled
That the binding constraint on Ukraine's economy is no longer capital, logistics or energy — all of which have been solved or worked around — but people, which cannot be.
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