Mikael Björknert, the Swedish banker who became chief executive of Privatbank in January, told Trade Finance Global (TFG) that Ukraine’s economy was performing better than many expected, with GDP growth maintaining a positive 3.2% in 2024, despite enormous defence expenditure.

“It’s an economy that, of course, is in deficits because we spend an awful lot of money on the defence and military sector,” Björknert said during an interview at the 2025 European Bank for Reconstruction and Development (EBRD) Annual Meeting and Business Forum in London. 

Not only this, but the cost of rebuilding has also grown dear. The highest reconstruction and recovery needs are in the housing sector, totalling nearly $84 billion, followed by the transport sector at almost $78 billion. The energy and extractives sector requires around $68 billion; the commerce and industry sector needs over $64 billion; and the agriculture sector more than $55 billion. Across all sectors, debris clearance and management alone is estimated to cost nearly $13 billion.

“But we have help from friends, meaning the IFIs [international financial institutions], but also the different states [that contribute] a lot of funds into Ukraine. So the economy in itself is actually positive,” said Björknert.

The resilience has surprised observers who expected Ukraine’s financial system to collapse under the strain of Russia’s invasion. Instead, Privatbank, which operates 1,100 branch offices across the country, has expanded its lending capacity with international backing whilst maintaining services in areas close to active combat.

Björknert described a delicate balancing act of keeping branches open as close to the front lines as safely possible. Only when branches are somewhere around 40 or 50 kilometres from the frontlines, Privatbank decides to shut them. “But we try instead to help both our customers, the corporates, the private individuals, and our employees, with different types of security and protection,” he said.

The bank’s proximity to conflict zones means staff spend roughly half their working hours in shelters during air raid warnings. Yet local communities resist closures. “Everyone tries to be there as long as possible,” Björknert observed. “When you close a branch, when you close the shop where you buy groceries, then it’s over.”

International partnerships prove crucial

Privatbank’s ability to maintain operations has been underpinned by partnerships with international lenders, particularly the EBRD. According to Björknert, the bank is set to originate €600 million in sub-loans this year through EBRD facilities, up from €400 million in 2023 and €240 million in 2022.

“EBRD has helped us a lot during the years to keep up normality for the corporates in Ukraine,” Björknert said. The partnership includes trade facilitation programmes that enable Privatbank to maintain relationships with international banks despite heightened risk perceptions about Ukrainian counterparties.

The collaboration addresses a critical gap in trade finance. International banks have naturally limited their risk exposure to Ukraine during wartime, leaving domestic institutions to fill the void. “The corporates are coming to us, which we are the largest bank, and they expect us to help them facilitate their trade,” Björknert explained.

The bank’s non-performing loan ratio of 2.7% — which Björknert described as “more or less nothing in a country in war” — has helped build confidence amongst international partners and enabled the expansion of credit facilities.

Natural conditions hampered by structural challenges

Despite the positive headline growth figures, Ukraine’s economy faces structural constraints that distinguish it from peacetime conditions. Björknert noted that whilst consumption and corporate investment continue, the nation’s turbulent history creates a shorter-term planning horizon compared with Western Europe.

“In Europe and Sweden, we have a little bit more long-term perspective because we are allowed to have it,” he said (Björknert came to Privatbank from Swedbank in Sweden). “Meanwhile, in Ukraine, which has a very turbulent history, they don’t really dare to look into the future as long as we are doing in the rest of Europe.”

The agricultural sector, Ukraine’s largest export earner, continues to function despite the conflict. Ukraine’s agricultural sector is currently its most significant export earner, accounting for 41% of the country’s total exports in 2021, up from 27% in 2013, and employing about 2.5 million people. This growth has been driven by favourable natural conditions, a strong production base, and an increasing shift towards European markets following Russia’s annexation of Crimea and ongoing aggression.

Ukraine possesses around a third of the world’s most fertile soil, including the highly productive chornozem or ‘black earth’. The country benefits from flat terrain, a temperate climate, adequate rainfall, and an extensive river network, creating optimal conditions for farming. In 2020, 68.5% of Ukraine’s total land area—41.3 million hectares—was used for agriculture, with 32.7 million hectares being arable land. These figures place Ukraine ahead of major EU countries like France and Spain in terms of agricultural land.

Russia’s invasion and blockade of Ukrainian exports have caused severe damage to the sector. By the end of 2023, losses and damages were estimated at $80 billion. Rebuilding is expected to cost $56.1 billion, with an additional $32 billion needed for demining. In response, the EU established initiatives such as the Solidarity Lanes and the Black Sea Grain Initiative to support exports and help prevent a global food crisis.

Nonetheless, Ukraine’s application for EU membership and the opening of accession talks in 2023 have renewed focus on the challenges of integrating its large and export-oriented agricultural sector into the EU, especially in the absence of prior reforms to the Common Agricultural Policy. 

Mining operations have also been severely affected, with most facilities located in Russian-occupied territories. Ukraine is among the world’s top ten suppliers of mineral resources and possesses 25 of the 34 raw materials classified as critical by the EU, including lithium, titanium, graphite, and rare earth elements essential for electric vehicles, renewable energy, defence, and semiconductors.

Unfortunately, many of these mineral deposits are located in the east and south of Ukraine, regions currently under Russian occupation or active conflict. The Ukrainian government estimates that around 20% of the country’s mineral wealth and half of its rare earth reserves are inaccessible due to occupation. Additionally, much of the data on Ukraine’s reserves stems from outdated Soviet-era surveys, raising doubts about the commercial viability of certain deposits.

Despite the war, Ukraine’s mining income has more than doubled, and the country’s skilled, cost-effective workforce and strong infrastructure mean it remains an attractive prospect for future investment. 

Ukrainian mining income in Ukrainian hryvnia (UAH) (in billions). Source: European Parliament Think Tank

The energy sector remains largely state-regulated and focused on domestic needs. Ukraine was once a net electricity exporter to European Union (EU) countries such as Poland, Romania, and Hungary, but the war has upended this role. Integration with the European electricity grid via ENTSO-E initially helped Ukraine maintain stability and benefit from high EU energy prices. However, relentless attacks on the power grid in 2024 caused widespread damage, electricity shortages, and blackouts, forcing Ukraine to rely on emergency electricity imports from the EU. Electricity prices have since tripled compared to 2021 levels, marking a significant reversal from Ukraine’s previous position as an energy exporter to that of an importer dependent on external assistance. 

By 2023, 70% of Ukraine’s electricity generation came from zero-carbon sources, including renewables, nuclear, and large hydropower. However, part of this transition was also a consequence of Russia seizing fossil-fuel power plants in Crimea and Donbas. Russia’s attacks have destroyed key infrastructure, including the Zaporizhzhia nuclear plant, reducing operational capacity from 39 GW to just 13 GW and resulting in an estimated USD 40 billion in combined direct and indirect losses.

Nevertheless, Ukraine continues to strengthen its resilience through the development of decentralised and renewable energy capacity, with 700 MW added since 2022, indicating a long-term commitment to energy security and sustainability.

Björknert highlighted a less discussed aspect of war consequences: currency hedging, typically used by companies to manage commodity price volatility, has been temporarily suspended by the central bank to maintain control over foreign exchange (FX) flows. This leaves Privatbank with limited tools to help clients manage market risks beyond providing working capital facilities in local and foreign currencies.

Across sectors, the narrative is that despite broader economic resilience, meeting organisations’ working capital needs will allow them to have a more optimistic future outlook.

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Björknert’s assessment reflects a broader narrative of Ukrainian economic resilience that has confounded predictions of collapse. The US, under the Trump administration, proposed a controversial deal exchanging military support for access to Ukrainian rare earths. However, Ukrainian President Volodymyr Zelenskyy refused to sign over 50% of these reserves, insisting instead on genuine security guarantees. Similarly, the continuation of normal banking services, from trade finance to consumer lending, suggests an underlying stability that extends beyond headline indicators.

“I thought, actually, when I come there, I would like to give energy, but they give me so much energy because they are so fantastic,” Björknert said of his interactions with Ukrainian staff and customers.

Privatbank’s experience illustrates how Ukraine’s financial sector has adapted to extraordinary circumstances whilst maintaining essential services. Whether this resilience can be sustained over the longer term will depend heavily on continued international support and the eventual resolution of the conflict.

“We continue as long as it’s needed,” Björknert concluded. “I think we will win this sooner or later.”