Ukrainian businesses and workers have started to prepare for the economic effects of the novel coronavirus pandemic, which will see many Ukrainians stay home or travel less for at least the next three weeks.
On March 11, Prime Minister Denys Shmygal announced nationwide quarantine measures. He also reassured the public that the country is prepared for a possible COVID-19 crisis at home, where there has been only one confirmed case of the infection. Shmygal, however, admitted that quarantine measures may result in damage to companies’ balance sheets.
Meanwhile, some businesses said they were already feeling the effects of the virus-linked market turmoil and have been taking steps to protect their employees, and provide continuity of their services.
Partial lockdown, closures
The nationwide quarantine will last until April 3, resulting in many border checkpoints closing, some flights being canceled or suspended and schools, entertainment centers and cinemas being shut down.
Shopping malls will also implement tighter security measures amid the health concerns, and millions of Ukrainian citizens are expected to travel and socialize less.
Shmygal said that Ukraine is ready to face both a financial crisis and a coronavirus epidemic. The country’s economy is in a much stronger state than it was during the 2008 crisis, he said in a televised statement on March 11.
“We have more liquidity in the banks than ever before. We have high gold and foreign currency reserves,” Shmygal said.
The prime minister also suggested that some businesses could benefit from the chaos. Businesses told the Kyiv Post that, while short term consequences are entirely bad for trade, there might eventually be some opportunities for Ukrainian business.
“On the one hand, there is a crisis, and on the other, these can be opportunities for our domestic market, for our domestic producers,” Shmygal said. Other analysts have predicted the crisis could drive some types of domestic consumer demand in Ukraine — digital products, essential goods and more.
Meanwhile, the government has not announced any specific economic stimulus or measures to protect Ukrainian businesses and their workers. But the central bank stated on March 12 that it might review inflation forecasts in April if needed, and would cut refinancing on its base rates from 11% to 10%.
The regulator also said it does not plan to introduce foreign exchange limits, and that its current reserves are enough to smooth currency rate fluctuations amid the market turmoil.
Worse-affected countries have implemented strong measures to try and rally their markets, reassure investors and help consumers. In particular, the U.K. and Italy have slashed interest rates and provided debt and mortgage relief, as well as loans to small companies and paid sick leave for affected workers.
Meanwhile, hospitality businesses have been hit hard in Ukraine, and expect to be less busy because public gatherings are limited. Business travel and hotel occupancy is reportedly down across Ukraine.
At least four major business conferences in Ukraine have been postponed until the summer or autumn – Dragon Capital’s Investor Conference, the Dnipro Economic Forum 2020: International Space, IT Days and the tech conference iForum. Ukraine has also limited flights into and out of the country.
Some silver linings
Three weeks of quarantine measures in Ukraine will likely mean lost wages for some Ukrainians who earn an hourly wage. The national average salary is $460 per month.
Information technology companies are worried about the crisis too, but they also see opportunities.
“With people in self-quarantine, games and entertainment will be primary ways to pass the time and make the quarantine period more manageable,” said Doug Dyer, vice president of Gaming at Innovecs, a global software development company.
“Same for social media and communications companies,” Dyer said. “While this may not be a long-term situation, if it lasts more than a few months, game developers and publishers will continue to weather the storm as new games are always going to be developed.”
But tech startup entrepreneur Lidiya Terpel told the Kyiv Post that some young companies are missing out on vital conferences, competitions and events abroad, called off because of the pandemic.
Others are seeing similar disruption: “Right now we see effects on decreased traveling from clients and team members,” said Andreas Flodstrom, CEO of the Swedish IT company Beetroot, which is highly active in Ukraine.
“A few development projects connected to the travel industry are frozen and there are some supply chain issues with equipment which we handle by buying more upfront,” he added.
Andrey Kolodyuk, a founder of Aventures Capital, said there are other silver linings, especially in tech, and that coronavirus will push the global economy toward more automation, and the Ukrainian IT sector will eventually benefit.
The so-called stay-at-home economy is already weathering the storm better than some businesses.
“Online and digital companies like DivanTV and Netflix will benefit as people switch from cinemas to online TV and entertainment,” Kolodyuk said, adding that grocery and goods delivery firms will prosper, as will online gaming, gambling, education and the providers of e-books.
“During the global coronavirus turmoil the businesses that will benefit the most are ones that offer optimisation, streaming services like Megogo, delivery apps, and distant communication tools like Zoom,” said Dmytro Shvets, co-founder of the RefaceAI tech firm.
“For hardware and offline companies, it will be challenging and painful,” he said.
Looking ahead, international companies may begin looking to Ukraine for more cost-efficient solutions if a global economic downturn manifests, according to Beetroot’s Flodstrom.
“Ukraine is very well positioned, these effects come with a bit of a delay though,” he said, referencing the effects of previous global market crises.
Working from home
European, U.K. and U.S. officials have said that less travel can contain the pandemic, and the official advice is that workers who can work remotely from home should do so.
More Ukrainian firms have also started asking their employees to work away from the office where possible.
“We are also introducing measures for office hygiene, and work from home policies,” said Flodstrom, one of multiple employers in Ukraine who have said they are implementing better sanitary measures.
“This outbreak pushes more companies to work remotely. This could create more openness for running remote teams in a positive way,” the IT executive added.
Elsewhere in Ukraine, other major companies are following the example of smaller tech companies where possible as a measure to protect their employees, maintain their work and prevent the virus’ spread.
Corteva Agriscience and Nestle, two major food companies with a large presence in Ukraine, told the Interfax news agency that they were placing restrictions on employee travel and encouraging remote work when possible.
“We asked employees who had traveled to regions where quarantine measures had been taken in the past 14 days to inform… and if possible, to work from home for two weeks,” Nestle said in a statement.
Coronavirus in Ukraine: What you need to know
- The first COVID-19 case was identified in Ukraine on March 3. It remains the only diagnosed case.
- Ukraine shut schools and canceled mass events starting March 12 to prevent the disease’s spread.
- Here’s how Kyiv is affected.
- Ukrainian airlines canceled some flights to 16 countries due to the novel coronavirus.
- Here’s how the virus is affecting Ukraine’s economy.
- 49 Ukrainians ended up in quarantine on a cruise ship near California. Previously, Ukrainians aboard the Diamond Princess ship refused to be evacuated.
- A Ukrainian lawmaker had to self-quarantine after meeting with a French counterpart who was later diagnosed with COVID-19.
- Ukrainians evacuated from the disease’s epicenter in Wuhan, China spent two weeks in quarantine in a sanatorium in Poltava Oblast and were released on March 5. Their arrival in Ukraine caused unrest.
