A missile strike on a Philip Morris International factory in Kharkiv, Ukraine, overnight has underscored the escalating economic impact of Russia’s war, even as Kyiv attempts to project an image of resilience and future growth. The attack, which caused a large fire spanning over 5,000 square meters, damaged part of the factory, according to Philip Morris Ukraine.
The incident is part of a disturbing pattern of attacks targeting Ukrainian industrial and economic assets, according to Ukrainian officials and Western observers. U.S. Senator Richard Blumenthal, during a recent visit to Kyiv, described the attacks as a “Russian hunt for American companies in Ukraine,” alleging that Vladimir Putin is deliberately targeting American factories and headquarters with missiles and drones.
According to the American Chamber of Commerce in Ukraine, 47 percent of U.S.-registered companies operating in the country have been attacked at least once. Beyond the Philip Morris facility, which produces Marlboro cigarettes, targeted assets include facilities belonging to the electronics manufacturer Flex and the agricultural trading conglomerate Bunge.
The attacks are taking a significant toll on Ukraine’s energy infrastructure. DTEK, a private Ukrainian power company, has lost approximately 70 percent of its generating capacity since Russia resumed targeting thermal and hydroelectric power plants, substations, transformers, gas pipelines, and power grids. The National Bank of Ukraine (NBU) forecasts that electricity shortages could reduce economic growth in 2026 by 0.5 to 3 percent. The International Monetary Fund has already lowered its 2026 GDP growth forecast for Ukraine to 1.8 percent.
In January alone, Ukrainian Prime Minister Yulia Sviridenko reported that tax revenues were 12 billion hryvnia (approximately 230 million euros) lower than planned. “These are huge losses for the country,” stated Economy Minister Oleksiy Sobolev. He added that each billion kilowatt-hours of electricity not produced due to the attacks costs the country approximately 0.15 percentage points of its gross domestic product.
Despite the economic challenges, Ukrainian officials maintain a cautiously optimistic outlook. Economist Elina Ribakova, Vice President for Foreign Policy at the Kyiv School of Economics, attributes Ukraine’s relative economic stability to reforms undertaken since the 2014 annexation of Crimea. “Crucial were significant improvements in macroeconomic management and strengthened integration with the West,” she said.
Ribakova emphasized the challenges of managing “massive macroeconomic shocks,” including infrastructure destruction, export collapse, revenue losses, population displacement, labor market disruptions, declining foreign investment, and extreme uncertainty. Though, she credited the NBU with maintaining the stability of the banking system, controlling inflation, and stabilizing the hryvnia.
Sobolev reported that Ukraine’s economy grew by 2.2 percent in 2023, while Russia’s grew by only 0.7 percent. He predicted that Ukraine’s economy would grow by 2 percent this year, despite ongoing blackouts. “It is as well an economic war. We must be economically stronger than Russia,” he stated.
Lesya Karnauch, head of the State Tax Service of Ukraine, thanked taxpayers for continuing to contribute to the state budget despite the ongoing conflict. “Despite the war, the constant bombardments, the unrest, and the lack of light and heat, you have filled the budget. Every hryvnia of tax paid is a contribution to Ukraine’s victory,” she said.
However, prolonged disruptions to electricity supplies pose a significant threat. The Kyiv School of Economics forecasts that extended outages could lead to production losses of 2 to 3 percent of GDP. Western financial aid is mitigating the impact, allowing for a revised GDP growth forecast of 3.2 percent for 2026.
Ukraine’s state budget currently allocates 43 percent of its spending to defense, resulting in a rapidly growing budget deficit that is largely covered by Western financial assistance. This is driving up the country’s national debt. The external trade deficit is also growing faster than expected, partly due to the need to import electricity and military goods.
Sobolev explained that the trade deficit is not a sign of economic weakness, but rather a consequence of Russia’s attacks forcing Ukraine to import electricity and military equipment. “These are financed by foreign aid, so the macro-financial situation remains stable,” he said.
The future of coal and metal industries, which account for 7.2 percent of GDP and approximately 15 percent of exports, remains uncertain due to power shortages and blackouts. Smaller companies are relying on diesel generators, which have increased their electricity costs fivefold since the start of the war.
Stricter export quotas for Ukrainian grain and vegetable oils imposed by the EU, as well as attacks on ports, are also impacting trade. Sobolev envisions a future where Ukraine, in partnership with European companies, becomes a leading global food exporter. He proposed a plan for European companies to invest in Ukraine, process agricultural raw materials, and jointly export them to Asia and Africa. He also highlighted opportunities for cooperation in developing biogas production for European customers.
Currently, 56 percent of Ukraine’s exports are agricultural products, worth $22.6 billion in 2025, with 47 percent going to the EU. The arms industry is now a major driver of economic growth.
Yuriy Lomikovsky, co-founder of the IRON Lviv Tech Cluster, described a shift from state-dominated arms production to a sector now dominated by 800 to 1,000 private producers. “Today, we support each other in our production. This helps to localize production and become independent of Chinese components,” he said. He emphasized the need for foreign investment and international cooperation.
Sobolev is seeking foreign buyers for large, state-owned enterprises such as Naftogaz, a fertilizer producer, and two banks. However, potential investors have expressed concerns about the security of their investments, asking, “Where is the guarantee that Russia will not destroy the facility after we have invested $100 million?” Sobolev acknowledged that such guarantees are currently impossible to provide.
Dimitar Bogov, Lead Economist for Ukraine and Moldova at the European Bank for Reconstruction and Development (EBRD), believes that Ukraine has the potential to become a “recent European tiger state” during the reconstruction period, echoing the success of Asian economies with rapid growth rates. He cited Ukraine’s strengths in defense, digital innovation, and traditional sectors like agriculture, but stressed the need for deep reforms, strong security guarantees, and increased private investment.
Bogov attributed Ukraine’s survival to the “resilience of the Ukrainian people,” which has allowed the economy to continue growing even during wartime. Tourists are still being invited to Kyiv, with a large sign proclaiming “Kyiv is waiting for you” displayed near St. Sophia’s Cathedral.
