After years of conflict, the Russian and Ukrainian economies are going through a new phase called “forced adjustment,” where features of a different economic structure are beginning to emerge to deal with ongoing difficulties.
In Russia, the economy has absorbed the impact of Western sanctions by turning to Asian markets and increasing military spending, which has become an engine of industrial growth, despite inflation pressures and labor shortages.
In contrast, the Ukrainian economy relies heavily on external support and redirecting resources towards domestic defense industries, with efforts to reform the hard-hit energy sector.
The report explains that the two countries are now living in a continuing “war economy,” where national capabilities are allocated to serve the war effort, which has brought about major changes in supply chains and monetary and financial policies that no longer adhere to the traditional rules of a free economy.
