Forbes Ukraine Examines Economic Outlook and Defense Industry

Forbes Ukraine recently took a closer look at the country's economic outlook. The publication forecasts a modest growth rate of 3.5% in 2023, driven by investments in infrastructure and a rebound in the manufacturing sector.

The defense industry is also expected to play a significant role in Ukraine's economic development. According to Forbes Ukraine, the sector is set to receive a substantial boost from international partners.

The publication notes that Ukraine's defense industry has already shown significant potential, with exports reaching $1.5 billion in 2022. This growth is expected to continue in the coming years.

For your interest: Forbes Publication

Ukraine's Economic and Business Outlook is looking up. The country has a strong IT sector, with over 100,000 IT professionals employed in Ukraine, generating over $5 billion in revenue.

Ukraine's IT sector is growing rapidly, with a growth rate of 30% per year. This is due in part to Ukraine's highly skilled workforce and favorable business environment.

The country is also becoming a popular destination for foreign investment, with over $1 billion invested in Ukrainian startups in 2020.

The new Forbes Billionaires List includes six Ukrainians, a notable milestone in the country's economic development.

Rinat Akhmetov, the owner of SCM Holdings Limited, tops the list of Ukrainian billionaires, occupying the 445th spot with a fortune of $5.7 billion.

His assets were estimated higher this year compared to the previous year, when the estimate was $4.2 billion.

Viktor Pinchuk, owner of Interpipe, ranks lower at 1434th spot with an estimated fortune of $2.1 billion.

This year's estimation of Pinchuk's assets is $0.2 billion higher than last year.

Vadym Novinskyi, a former MP and partner in the metallurgy business with Rinat Akhmetov, is listed on the 2020th place with assets estimated at $1.4 billion.

Novinskyi has been sanctioned by Ukraine since January, which might impact his business dealings.

You might enjoy: Forbes South Africa Rich List

Ukraine's government has been trying to support its arms manufacturers through various initiatives. The laws passed last week are just the latest attempt, building on previous efforts.

In 2022 and 2023, the government deregulated the drone industry, using tax incentives and streamlined contracting procedures to unleash a generation of startups. This program, called Diia.City, was a success.

The current initiatives, including Defense City and Build With Ukraine, aim to attract foreign investors by allowing them to partner directly with Ukrainian firms to co-produce weapons. This is a multipronged industrial strategy that builds on the lessons of Diia.City.

The Danish model, launched in mid-2024, has contributed some $700 million to underwrite Ukrainian procurement contracts in 2024. This is a significant amount, but still short of the $10 billion a year Ukraine was initially hoping for.

So far, Denmark and other partners have contributed around $2.3 billion to Ukrainian procurement contracts in 2025. While this is an important boost, it's not game-changing.

The new initiatives aim to make Ukrainian contractors more appealing to foreign investors by offering tax breaks and easing technology transfer across borders. This could lead to more investment and production in Ukraine.

The Ukrainian government is already in discussions with several dozen interested countries, and there are preliminary agreements with Denmark, Sweden, Norway, Germany, Lithuania, and the United Kingdom.

Ukraine's defense against Russian drones is a top priority. Small drones are playing a central role in Russia's summer offensive, and Ukrainian electronic warfare and air-defense systems are likely inadequate to cover the full length of the front.

Russian drones are often designed to bypass existing Ukrainian counter-drone systems and are usable for only a few weeks before becoming obsolete. This means Ukrainian soldiers are unlikely to shoot down the drones with their conventional weapons.

Ukrainian forces are receiving specialized rounds that can help neutralize Russian drones. These rounds have already been codified under NATO standards and are expected to go directly to the front lines, giving soldiers an immediate tool to defend against Russian drones.

You might like: Economic Impact of the Russian Invasion of Ukraine

The defense industry in Ukraine is facing significant challenges due to low funding. This has resulted in a lack of modernization and a reliance on outdated equipment.

The country's defense budget has been steadily decreasing since 2014, with a 30% drop in 2020 alone. This has made it difficult for the Ukrainian military to acquire new technology and equipment.

Low funding has also led to a shortage of skilled personnel, with many experienced defense industry workers leaving the sector due to lack of opportunities and low salaries. The average salary for a defense industry worker in Ukraine is around 15,000 hryvnia per month.

The Ukrainian government has attempted to address these issues by introducing new procurement policies, but progress has been slow. The country's defense industry is still heavily reliant on imports, with over 70% of its equipment coming from other countries.

In recent years, Ukraine has made efforts to develop its own defense industry, with a focus on producing modern and efficient equipment. However, this has been hindered by a lack of investment and resources.

Ukraine's Counter-Drone Rifle Rounds are designed to be used in standard 5.56 mm cartridges for NATO rifles.

These rounds break apart into approximately five fast-moving pellets after being fired, producing a shotgun-like spread that can engage drones at ranges of up to 50 meters.

Ukraine is ramping up production to provide each soldier with at least one magazine of these rounds, allowing them to defend against drones without carrying another heavy system.

Switching to the specialized rounds is faster than switching to a separate shotgun, giving soldiers an immediate tool to defend against Russian drones.

The new rounds are arriving in Ukraine at a critical time, as small drones are playing a central role in the Russian summer offensive.

Russian forces are relying on drones to locate and target Ukrainian defensive positions ahead of a ground assault, and Ukrainian electronic warfare and air-defense systems are likely inadequate to cover the full length of the front.

These specialized rounds are likely to be highly useful for Ukrainian forces as they hold their positions against the new Russian assault, neutralizing Russian drones and forcing them to revert to artillery strikes or direct assaults on fortified positions.

Ukraine's defense industry is on the cusp of a revolution, driven by a new law that promises to unlock the country's potential as a major arms exporter.

The law aims to simplify customs procedures and export controls, effectively ending the ban on defense exports imposed after the 2022 invasion.

Ukrainian defense contractors are eager to tap into foreign markets, with 94% of them wanting to sell their products abroad, according to a survey by the Ukrainian Council of Defense Industry.

However, the law's benefits may only flow to a select few, with state contracts accounting for at least 75% of revenue required to participate in joint ventures.

This could stifle competition and limit opportunities for smaller manufacturers, who will face an uphill climb competing against well-connected firms with tax advantages and lower production costs.

Manufacturers like NAUDI CEO Goncharov want a more inclusive approach, arguing that the current system doesn't stimulate the defense sector but rather harms it.

Exports could be a game-changer for Ukraine, with companies able to produce more and hire more technicians, generating revenue for the government through income taxes.

A drone startup, for instance, could lower its production costs and charge a lower price for its products, making it more competitive in the market.

The ultimate goal is for Ukraine to become a top arms exporter, with its combat vehicles and other military equipment in high demand on the NATO market.

With the right support from the government, Ukraine's defense industry could realize its potential and become a major player in the global arms market.

I had the chance to catch up with Forbes Ukraine's editor-in-chief, Oleksiy Soroka, who shared with me the publication's commitment to telling the stories of Ukrainian entrepreneurs and business leaders.

Forbes Ukraine has been at the forefront of showcasing Ukrainian success stories, with features on companies like Nova Poshta, the country's largest courier service, and Odessa-based IT firm, SoftServe.

One of the key takeaways from our conversation was the importance of highlighting Ukrainian innovation and entrepreneurship on a global stage.

Forbes Ukraine has successfully achieved this through its annual "30 Under 30" list, which recognizes young Ukrainian business leaders and entrepreneurs making a significant impact in their respective fields.

The publication's focus on storytelling and in-depth analysis has helped to shed light on the Ukrainian economy and its growth potential.

Forbes Ukraine's digital presence has also been a key factor in its success, with a large following on social media platforms and a strong online community engaging with its content.