It will be hard for Ukraine’s economy to sustain a long war

FOR SOMEONEGDPGDP trying to run an economy in the middle of , Serhiy Marchenko is oddly upbeat. The Russians may have occupied or blockaded his country’s main ports and forced the shutdown of most of its businesses, but Ukraine’s finance minister radiates calm. “The situation is very difficult, I am not going to minimise that,” he says over a latte in a slick café near his ministry. “But we can manage it.” When an air-raid siren interrupts the interview, he simply ignores it.Reasons not to panic are quite numerous. Ukraine went into the war in good shape, with its economy growing at an annualised quarter-on-quarter pace of almost 7%; strong prices for its exports of grain, iron and steel; a well-regulated banking industry and a government deficit of less than 3% of last year. Its debt stood at just under 50% of , a number that many finance ministers can only dream of. An impressively digitised tax and benefits system means that revenues are still coming in smoothly from the parts of the economy that are still functioning. Pensions and government salaries are all still being paid, even in areas that are now under Russian occupation, thanks to resilient digital systems and a surprisingly . Most businesses, for now, are still paying their employees, even if they cannot operate as normal, or at all. Amazingly, payroll taxes are down by only 1%, the minister says.