The United Nations country team in Ukraine is proud to present its joint 2021 annual results report and key priorities for 2022 in response to the ongoing war and its consequences. Despite the COVID-19 pandemic and the ongoing war in Ukraine the United Nations, in close cooperation with the government, civil society and development partners, has achieved noteworthy results in 2021. In 2022, following the start of the war, the United Nations remained in Ukraine to support the Government and the people, including in areas in the immediate vicinity of the frontline. To address the immediate humanitarian needs, the UN is also supporting the government’s vision for early recovery as per the National Reconstruction Plan.
Chapter 1 Key developments in the country and regional context in 2021
In 2021, Ukraine’s development continued to be influenced by the effects of the conflict in eastern Ukraine and socio-economic implications of the COVID-19 pandemic. Additionally, the country’s regional context was affected by the volatile relationships between key regional players, including the Russian Federation, the United State of America, North Atlantic Treaty Organization (NATO) and the EU. Deteriorated security situation, affected by the recurring tensions around Ukraine caused by the Russian Federation’s military activities along the borders of Ukraine attracted significant international concern and impinged on Ukraine’s socioeconomic development and domestic political process.
The political environment in Ukraine remained stable with some technical changes in the Cabinet of Ministers taking place upon the initiative of the President who remained the key determinant of Ukraine’s domestic dynamics. Following the major steps taken by the Government on its reform agenda in 2020, the process remained on track although no significant new reforms had been initiated by the Government since its reforms agenda was influenced by political imperatives. These imperatives consisted in preserving macroeconomic stability and increasing budget revenues, promoting infrastructural development, and deoligarchization. As a result, some of the reform processes saw little outcome, e.g. ‘tax amnesty’; others achieved moderate progress, e.g. the judicial reform, whereas still others, like the security sector reform, were postponed for 2022.
Ukraine’s reforms continued to receive significant international support, both in terms of funding and direct advocacy led by the G7 countries. And yet, due to the geopolitical and regional volatility around Ukraine, the emphasis of this support was drawn away from Ukraine’s reforms to focus on security. As a result, reforms became less sustainable, which may puts at risk obtaining further international assistance, thus leading to potential potential setbacks in the reform agenda. This was evidenced by developments that eroded the independence of the national anti-corruption infrastructure and undermined the completion of judicial reform, which faced resistance at various levels, which. In sum, interests of political stability and security interacting with the national reform agenda increased risks for and vulnerabilities of the sustainability of Ukraine’s reforms.
The conflict in eastern Ukraine continued to impact on Ukraine’s stability, and its political and sustainable socio-economic development. Despite violence at the contact line remaining at relatively lower levels compared to previous years, the conflict remained a constant source of threat for the country’s stability, limiting the prospects for its economic development, undermining social cohesion and contributing to an impasse in Ukraine’s Euro-Atlantic aspirations. The continuing isolation of the non-government-controlled area (NGCA) in eastern Ukraine from the rest of the country brought about by the politicization of the pandemic mitigation measures fuelled more divisions in Ukrainian society and facilitated the absorption of the NGCA by the Russian Federation. The consolidation of divisive lines in eastern Ukraine was mirrored by the consolidation of national public opinion, which increasingly interpreted the problem of reintegration through the government concept of deoccupation. The Government’s initiatives aimed at eliminating isolation by reaching out to targeted population in NGCA residents had limited effect in imposing its political agenda and also due to the continued stalemate in all negotiations on eastern Ukraine.
Due to the deterioration of Ukraine’s regional security, the Government had to seek stronger international support in the form of commitments and guarantees as well as more security assistance against a backdrop of a complete lack of bilateral diplomatic dialogue with the Russian Federation. This situation led Ukraine to adopt a more assertive foreign and security policy. This policy aimed at positioning the country to take on a more active role in regional politics, gaining more leverage in its relations with key international partners, enhancing security, and delinking security policy goals from reform commitments. All of these served to strengthen the political agenda of preserving the national sovereignty and restoring territorial integrity. The launch of the Crimean Platform became one of the main results of foreign policy assertiveness, bringing the issue of Crimea back on the international agenda and formalising diplomatic support from Ukraine’s international partners. Other important innovations of Ukraine’s foreign policy in 2021 included a greater emphasis on regional cooperation frameworks similar to the Association Trio, Lublin Triangle and the Quadriga, seeking to promote Ukraine’s Euro-Atlantic integration, which remains the key goal of the national foreign policy. The renewal of the US-Ukraine Charter on Strategic Partnership and the mobilization of wide political and diplomatic support to the country’s sovereignty and security in the face of military escalation crises have become the largest achievement of Ukraine’s foreign policy.
The 2030 Agenda for Sustainable Development remained a critical part of Ukraine’s key longterm development framework, together with the EU Association Agreement. In March 2021, the Government approved the National Economic Strategy 2030 (NES 2030), which became the central strategy for long-term strategic planning and monitoring in Ukraine. The NES 2030 set ambitious goals of: doubling Ukraine’s GDP by 2030; creating an enabling environment for business and economic development; winning the competition for capital; developing key sectors; and ensuring equal human development. However, economic performance remains structurally constrained by uncompleted reforms and transformations in key sectors of the economy. There was still a key concern in 2021 regarding energy security and energy poverty, which led the Government to tighten regulations of the gas market, not only for the population, but also for industries. Market price distortions are expected to further increase and remain a burden on the state budget and the private sector.
In 2021, the GDP was estimated to grow by 3.4 percent (WB), with similar moderate growth rates in the next two years. Economic performance was further impacted by the COVID-19 situation, the slow increase of vaccination rates and new adaptive lockdowns since November 2021, as well as the market reaction to the military build-up and escalation near Ukrainian borders.
In July 2021, the Government of Ukraine updated its Nationally Determined Contribution (NDC) to the Paris Agreement, committing to an economy-wide net reduction of 65 percent in greenhouse gas emissions by 2030 compared to 1990, leading to net zero by 2060. The NDC is therefore an ambitious commitment by the Government that needs to be transformed into concrete actions and a related investment plan, which will require significant national and international financing. In October 2021, Ukraine submitted its application to the United Nations Partnership for Action on Green Economy (PAGE), which support countries in reframing their economic policies by creating an enabling environment to finance the green economy transition.
The United Nations Common Country Analysis, updated in December 2021, further outlined key Ukraine’s development challenges and opportunities guiding United Nations actions and programming interventions in the coming years under the new Ukraine-United Nations Cooperation Framework.