On the verge of a double crisis. How Ukrainians can keep their savings during a financial storm

Russian military aggression in Ukraine caused enormous economic damage to our country. Damage to infrastructure is already estimated at more than $100 billion. Ukrainian GDP this year may fall by 30-50%. Our country will fight this economic crisis with the help of Western partners. But another crisis is approaching – the global one.

Today, together with experts, they figured out how Ukrainians should behave when two types of financial storms hit the country.

The fight against inflation will hit the economy

The global economy, after being flooded with cheap money during the covid era, is facing a new challenge: unprecedented price increases. In most countries where inflation in recent decades has been in the range of 1% to 2% per annum, prices have risen by 8-10%. In some European countries, prices have increased by 20% in a year.

And this is not the limit. The energy blackmail of Europe by Russia and the blockade of Ukrainian ports through which it is impossible to export Ukrainian grain are pushing up energy and food prices. So inflation could rise even more.

In such a situation, the world’s central banks have no choice but to try to reduce inflation by monetary methods. Behind this tricky phrase is a very simple principle – central banks raise rates, thereby making money expensive. In parallel with this, excess money will be withdrawn from the economy. This in turn slows down the economy and inflation.

“Monetary measures can help, but in the short term. After all, we have structural inflation, which is one of the most difficult in the context of fighting it. At the same time, a sharp, excessive monetary deceleration can provoke “gray stagflation.” This is when there will be no fall in GDP, but growth will decline to a minimum of 1-1.5% against the backdrop of high inflation, several times higher than the target level,” says economist Alexei Kushch.

In such a situation, the world economy may enter a new global crisis, which will also affect Ukraine. Of course, it will be much less noticeable than the direct losses of the economy from the war, but it can significantly slow down the speed and volume of post-war assistance from the allies to our country.

Spend here and save there

Is it possible to prepare for a double protracted crisis? Experts say that two mutually exclusive approaches should be applied here – now to spend money on durable goods and save on everyday expenses.

“We live with galloping inflation, the levels of which are from 10% to 50% per year. This type is characterized by the rapid depreciation of the hryvnia, so it is more profitable for ordinary Ukrainians not to save, but to spend money on everything from cars and refrigerators to shorts and food. Everything is extremely simple: there is a shortage of goods, and inflation accelerates,” says Oleksandr Goncharov, director of the Institute for Economic Development of Ukraine.

By the way, American investor and writer Robert Kiyosaki, author of the bestseller Rich Dad Poor Dad, today advises Americans to buy cans of tuna and beans, since you can’t spread gold and bitcoin on bread.

In turn, Goncharov advises to master the science of saving, and to find the “Cookbook of a Thrifty Housewife” on the Internet. This way you can save on food. Other experts agree with this.

“The only thing that people who live in Ukraine can do for themselves is to save money as much as possible for living and subsistence in future years. Recession, the fall of the economy, the fall of the banking sector and the national currency, the energy crisis and the potential impossibility of resolving it are factors that which give an understanding that there will be less work, crime in the country will grow, the sufficiency of products for the population will be in question,” explains Maxim Oryshchak, an analyst at the Center for Exchange Technologies.

According to him, the problem is complicated by the fact that more than 50% of Ukrainians do not have official savings.

“It is possible that people have some savings for a rainy day in cash dollars and hryvnias, but if prices continue to rise, then the money savings will soon run out,” Maxim Oryshchak continues.

According to him, the forecast for a fall in Ukraine’s GDP in 2022 remained unchanged – at the level of 44%. But a forecast is not accurate data. This is a benchmark that can be adjusted.

“Each crisis is unique, each crisis has different causes, different duration, different depth – the advice in each case will be different. Therefore, in our opinion, there can be no universal advice, except to invest in yourself – your development and diversify everything that is possible in order not to be left with nothing in any case,” Oryschak continues.

The expert advises converting part of the money savings into essential goods.

“Now may also be a good time to learn new professions. And now we are not talking about IT professions, or creative specialties, but about agricultural professions. You need to understand on your own how you can grow potatoes, carrots and cabbage, as well as how to pickle them properly and store for a long time,” says Oryschak.

To some, the advice will seem simple and obvious, but it can be said for sure that not all people know how to do this. And such skills can be supported if there is no money or food.

At the same time, the expert advises changing all your financial habits with only one goal – to reduce spending. But keeping money in banks, according to him, is dangerous, because in the event of a default, money will not be returned to people.

Alexander Goncharov advises, if possible, to keep part of the funds in foreign currency, for example, in US dollars and euros.

“Do not be ashamed to be selfish, without losing, of course, your human appearance. If someone owes you money, put pressure on the debtor and get paid. You can even agree to return part of the debt, because in a few months the debtor may have nothing,” Alexander Goncharov says

At the same time, all your free assets, such as real estate, need to be made to work during this difficult time. You can rent an apartment, albeit inexpensively, but to decent people. This will help you get through tough times.

Earlier we wrote about what will happen to the hryvnia exchange rate and the savings of Ukrainians. Read about the features of currency exchange during the war here.