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Macroeconomic Policies for Wartime Ukraine

As Ukraine faces the prospect of a prolonged war, there is a growing need to reassess the country’s macroeconomic strategy to ensure its long-term economic stability and survival. The current policy mix, which relies heavily on running down foreign reserves, tax suspension, and other temporary measures, is increasingly untenable. It could result in a major economic crisis that would cripple Ukraine’s ability to sustain its war effort over an extended period.

A new CEPR Rapid Response Economics report outlines key macroeconomic policies to realign the economy towards a more sustainable trajectory, capable of withstanding the pressures of a drawn-out conflict. This requires prudence and caution in public finances, a durable nominal anchor, a resilient financial system, careful management of external balances, and flexibility and efficiency in the allocation of scarce resources.