Ukraine minister: Blackouts could lead to bigger GDP contraction in 2022

© Reuters. FILE PHOTO: A view of an apartment building damaged by Russian shelling, as Russia's attack in Ukraine continues, in Avdiivka, Donetsk region, Ukraine November 7, 2022. REUTERS/Oleksandr Ratushniak/File Photo

By Andrea Shalal

WASHINGTON (Reuters) - Ukrainian Economy Minister Yulia Svyrydenko on Wednesday said Russia’s attacks on civilian infrastructure and rolling blackouts could result in a bigger contraction of gross domestic product in 2022 than the earlier forecast of a 35% drop.

​ Svyrydenko, in Washington to meet with senior U.S. officials, told reporters the Ukrainian government would continue to need foreign budgetary assistance, but was also taking steps to reduce costs by cutting staff and privatizing smaller state-owned enterprises.

Ukrainian President Volodymyr Zelenskiy last month said his country would need $38 billion to cover next year's expected budget shortfalls, and an initial $17 billion to begin work on the most urgent infrastructure repairs.

Svyrydenko, who also serves as first deputy prime minister, said those sums had not yet been revised to reflect the massive damage inflicted on civilian infrastructure by Russia since Oct. 10, and resulting electricity outages.

She said people and businesses in the capital Kyiv were dealing with blackouts of six or more hours a day, affecting economic output.

"The problem is that companies are not working. If the blackouts are going to continue during the next few weeks, GDP might fall more," she said, citing ministry estimates that economic output dropped by as much as 39% in October, after a contraction of 35% in the August-September timeframe.

Asked about comments from Republican leaders in Congress suggesting they would curtail U.S. aid to Ukraine, Svyrydenko said Ukraine's fight was an existential one and the world order would change if it lost.

She said she had not met with any Republican leaders, but noted that the United States had consistently made good on its promises since the war began on Feb. 24.

Biden on Wednesday said Washington had not given Ukraine "a blank check" but he expected U.S. aid to continue despite a likely Republican takeover of the House of Representatives.

Ukraine was providing clear records about its spending of international aid, she said, adding that work was continuing on setting up a coordinating platform for international funds.

Her talks with U.S. officials were largely technical, focused on specific needs including transformers, generators and even LED light bulbs that could help save power.

Svyrydenko said Ukraine is also seeking a yearlong extension of the suspension of U.S. steel tariffs to help steelmakers, and she discussed the issue with U.S. Trade Representative Katherine Tai and other U.S. officials.

Tai's office did not address the steel tariffs, but said the U.S. trade chief encouraged Kyiv to enact reforms to create a more conducive business investment.

Tai and Svyrydenko also agreed to work to upgrade a bilateral 2008 trade and investment accord to support Ukraine’s efforts to establish a more transparent and predictable business environment.

Svyrydenko also met on Tuesday with U.S. Commerce Secretary Gina Raimondo, who pledged continued support for Ukraine, including help to rebuild infrastructure.