DOI: https://doi.org/10.62204/2336-498X-2023-3-2
STRATEGIC TOOLS OF BUSINESS ADAPTATION
IN THE CONDITIONS OF MARTIAL LAW
Irina Ignatieva,
Doctor of Economic Sciences, Professor,
National University of «Kyiv-Mohyla Academy», Ukraine,
iignatyva@ukr.net; ORCID: 0000-0002-9404-2556
Alina Serbenivska,
Candidate of Economic Sciences, Associate Professor,
National University of «Kyiv-Mohyla Academy», Ukraine,
serbenivskaalina@gmail.com; ORCID: 0000-0002-4327-9457
Diana Kucherenko,
Candidate of Economic Sciences, Associate Professor,
Science and Research Institute of Social and Economic Development, Kyiv, Ukraine,
dianakucherenko29@gmail.com; ORCID: 0000-0001-6804-0197
Annotation. In modern conditions of the need to adapt business to the conditions of bifurcation, the role of the implementation of the main principles of management, first of all, the ability to adapt to rapid changes in the environment, as well as the situational approach to management, which is the ability to respond adequately and promptly to existing and new threats to the normal business activity The instability of the economic environment during the martial law, the appearance of qualitatively new problems necessitates a theoretical study and substantiation of practical recommendations to ensure the adaptation capabilities of Ukrainian enterprises. Studying the theoretical background of enterprise adaptation, it is possible to single out two conceptual approaches to its semantics and morphological interpretation, namely: instruments of state support and effective implementation of instruments of corporate social responsibility as one of the main directions of ensuring the functioning of not only business, but also solving certain tasks of territorial management under time of martial law.
The study was based on the use of: method of comparison, generalization – to clarify and formalize the essence of the concept, graphoanalytical method – to provide clarity of the material and schematic representation of a number of theoretical and practical provisions of the study.
Keywords: strategies, strategic tools, business adaptation, corporate social responsibility.
Introduction. The article is devoted to the analysis of the economic situation in Ukraine, which is related to the state of war and the long-term bifurcation changes taking place in the country since 2014. The situation that has developed in the business environment of Ukraine requires the understanding and development of certain management and economic tools for the adaptation of business entities to new conditions. The article outlines the main areas of improvement of management tools that Ukrainian business needs today.
Results and their analysis. Over the past three years, Ukrainian enterprises, which are the basis of the country’s economic strength, have been forced to work in conditions of uncertainty. Due to the occupation of the fifth part of Ukraine, the destroyed infrastructure throughout the country, the impossibility of conducting business in the front-line territory, the destruction due to shelling of production facilities, the looting and destruction of the assets of enterprises in the liberated territory, led to the fact that some enterprises ceased their activities, and some – have relocated and are in a state of crisis, under the influence of constant risks. Under such operating conditions, the primary measures to support Ukrainian business should be measures aimed at financial support, adaptation, establishment of new supply chains to the end consumer, and diversification of activities. Moreover, the duration of further hostilities remains unknown.
Due to the war, the profits of almost all Ukrainian companies decreased by more than 40%. The main causes of business losses include the following:
- dangerous working conditions;
˗ destruction of enterprises and damage to equipment due to hostilities; ˗location of enterprises in the occupied territory, loss of employees;
- power, water and heat supply interruptions;
˗ relocation and search for new customers, partners and suppliers due to relocation;
˗increase in fuel prices;
- state regulation of the exchange rate;
˗ disruption of logistics and supply problems;
˗ lack of a sufficient number of solvent customers in the domestic market;
˗decrease in demand for products and services, decrease in sales volumes;
- rising prices of raw materials and materials;
˗ unfair competition, raiding;
˗ security restrictions (curfew, military actions); ˗ inflation, significant financial costs [20, 22, 16].
The loss of human capital should be singled out as a separate point. Since many Ukrainians left the country and closed their businesses, unemployment in the country increased. Of the 10 million citizens who left Ukraine, half are of working age. According to statistical data, the situation began to change for the better. Thus, according to the Ministry of Finance of Ukraine, if in June 2022 the number of officially registered unemployed people in Ukraine was 316,000, then in November 2022 there were about 239,000 of them, and in December 215,000. Although the actual number of unemployed is 2.6 million people [19]. According to the publicized data of People’s Deputy Ya.
Zhaliznyak, this state is not related to the revival of business, but to other reasons:
- unemployment benefits are currently paid only for 90 days;
- the balance of departures abroad is negative again since October, people are leaving;
- men have to bring documents from the military office before registering for unemployment, so now 77% of registered unemployed are women [23, 18].
The study of the problems of enterprises by types of economic activity allows us to draw conclusions that, in addition to common problems related to logistics, energy, and the destruction of capacities, business entities have difficulties due to the specifics of the branch of activity (Table 1).
Таble 1
Main problems of economic entities of Ukraine by types of economic activity during martial law
|
Type of economic activity |
Changes in structure and consumption |
| Agro-industrial complex |
Loss of arable land, both in occupied and de-occupied territories, due to mining; Loss of logistics routes; Loss of labor force; Increase in the price of seed, fertilizers and fuel; Loss of the 2022 harvest in the occupied territories; |
| IT industry | Relocation of part of the personnel abroad; |
| Energy | Destruction of energy infrastructure; Lack of qualified personnel; |
| Trade |
Interruptions in the supply of product groups; Loss of consumers; Lack of personnel; Change of working mode; Damage to buildings, shop premises, engineering networks; Losses of goods in warehouses; |
| Metallurgical industry |
Loss of logistics routes; Loss of production capacity in the occupied territories; Loss of sales markets; |
| Services |
Logistics, transport and insurance services experienced the biggest losses; Ruined infrastructure; Because of the curfew, it is impossible to deliver goods around the clock and the costs of carriers have increased; The number of insurance cases increased; |
Source: summarized by the authors based on [8, 21]
Actual data [13, 14, 15, 22] indicate rather restrained entrepreneurial activity, therefore the actions of government institutions should be aimed at minimizing the negative consequences of the military invasion for Ukrainian business. Research shows that today the Ukrainian government has developed and implemented programs that provide temporary relief and business support during martial law. The main goal of such measures is to reduce financial obligations for the government as much as possible and to stimulate development in difficult situations. However, today it is important to support entrepreneurial organizations at the state level, first of all, the appropriate legislative framework, financial and credit and material and technical support, scientific and methodological, informational and advisory and personnel support of entrepreneurial organizations [10].
An important lever for the effective operation of enterprises in a crisis situation is the activity of the state in tax, financial and other spheres. In Ukraine, under the conditions of martial law, there have been certain changes aimed at supporting business (Table 2).
Таble 2
Tools for business support by state institutions during military aggression
| Tool | Kind of help |
| The list of territories on which hostilities are (were) taking place or temporarily occupied by the Russian Federation, developed for the implementation of Resolution No. 1364 and approved by the Ministry of Reintegration, cannot be used for taxation purposes. Affected taxpayers will receive appropriate benefits; | |
| Natural persons-entrepreneurs of the I and II groups are exempted from payment of state tax during the period of martial law and during the year after its termination; | |
| Enterprises and natural persons-entrepreneurs of the 3rd group will be exempted from paying EUV for employees who were drafted into the Armed Forces, other armed formations (including territorial defense). The fee will be paid at the expense of the state; | |
| Postponing the payment of taxes for all enterprises that are unable to pay them; | |
| The implementation of the PRO for all natural persons-entrepreneurs is postponed; | |
| A moratorium has been established on all types of business inspections; | |
| All measures of market and consumer supervision in all matters, except for price regulation and control over pricing, have been abolished; | |
| Canceled: VAT and income tax for businesses with a turnover of up to UAH 10 billion, Payment of environmental tax, minimum tax liability and payment for land where hostilities took place | |
| Compensation to the employer for labor costs for each employed person from among internally displaced persons as a result of hostilities during martial law in Ukraine at the expense of the state budget reserve fund | |
| Help from the Business Ombudsman Council. The Business Ombudsman Council represents and defends the legal rights of entrepreneurs before government authorities free of charge. Lawyers at the council help businesses resolve disputes without going to court. | |
|
Providing loans at 0%: 1. During the war, the government reduced the number of restrictions under the “5-7- 9%” program; 2. An entrepreneur who needs support can get an interest-free loan of up to UAH 60 million for a period of up to 5 years. Interest on the loan during the war will be paid by the state with an 80% state guarantee. |
|
| It’s your business. Program of micro-grants up to UAH 250,000. It is designed for everyone who wants to start or develop their small or micro business. From tailoring companies, service stations, dry cleaners to coffee shops, bakeries, hairdressers, etc. Funds can be spent on the purchase of equipment, purchase of raw materials, payment of rent, marketing and advertising services, commercial concession, leasing. The recipient of the grant is obliged to create at least one workplace. | |
| Your garden. Grants program for the creation or development of horticulture, berry growing and viticulture for planting and arranging a new garden, berry garden, vineyard with an area of 1-25 hectares. Grants are provided on the basis of cofinancing – up to UAH 400,000 per hectare, but no more than 70% of the cost of the plantation project. Employment of 6-10 permanent and 125-425 seasonal workers, depending on the culture and area of plantations. |
| A new level. Grant program for processing enterprises up to UAH 8 million. Funds for the purchase of equipment for the creation or increase of production capacities of processing enterprises, in particular the production of furniture, building materials, clothing, fittings, metalworking lines, agricultural processing, etc. The goal of the program is to increase the share of processed products, in particular in exports. The recipient of the grant is obliged to create up to 25 jobs. | ||||
| Own greenhouse. The program of grants for the development of greenhouse farming. Up to UAH 7 million for 2 hectares, but no more than 70% of the project cost. Funds can be spent on the creation of a greenhouse complex, the purchase of seed materials, and the purchase of technical equipment. The recipient of the grant is obliged to create at least 14 jobs. | ||||
| IT startup. Grants up to UAH 3.5 million. The grant can be spent on employee salaries, payment of consulting services, purchase of equipment, research and development works, marketing. The goal of the program is to create new companies and jobs in the field of high technologies, as well as to increase IT exports. The recipient of the grant is obliged to create 3 or more jobs, depending on the stage of the startup’s life cycle. | ||||
| Start in IT. Grant for obtaining a profession in the field of IT. Funds for studies in certified schools will be available to Ukrainians who did not receive formal education and do not have qualifications / experience in the field of IT. | ||||
| The state procurement system “Prozorro+” was adapted to wartime. The platform was created for quick interaction and business relocation. It is designed to quickly meet the needs of authorities and local self-government in critical goods and to organize business around the requests of the state. Any representative of a business registered on the platform as a “Supplier” can sell on the Prozorro+ platform. | ||||
| Joining the NCTS computerized transit system and implementing European practices in customs matters in Ukraine, through the implementation of legislation on the implementation of organizational procedures for joining Ukraine to the “Convention on the Common Transit Procedure”. | ||||
|
Chatbot to help business during war from the State Regulatory Service of Ukraine @businessWar_bot, with which entrepreneurs can get advice: • ask any question about your business and get advice orally or in writing; • report your business problem and solve it; • provide suggestions for improving legislation in any business-related matters. |
||||
| Supply Chain Sustainability Platform based on the Enterprise Europe Network in cooperation with the European Cluster Collaboration Platform with the support of the European Commission and EISMEA The platform was created, in particular, to support citizens, companies and the economy of Ukraine to overcome supply chain disruptions caused by Russia’s open military attack on the territory and people of Ukraine. | ||||
|
Interactive dashboard: Ukraine’s exports. An online tool containing data on the export of goods from Ukraine for 2022 and in comparison with 2021. With the help of the service you can: • find out the volumes and dynamics of Ukrainian export of goods; • compare export volumes in 2021-2022 by: product categories, partner countries, world regions. |
||||
| The Ministry of Economy of Ukraine has launched a chatbot @TrudEconomBot, with which users will be able to find information about the organization of labor relations during the war. The service is available in Telegram. Answers to frequently asked | ||||
|
questions regarding: • special features of vacations; • wages; • keeping documentation, etc. during hostilities. |
||||
Source: summarized and systematized by the authors based on [2, 5, 6, 9]
The table shows the main types of assistance, as this list is constantly updated. Only in the first 5 months of 2023, 5 additional online services for business assistance were developed by various state institutions [13, 14]. Administrative and legal instruments are mainly aimed at reducing the tax burden on the business sector. Which gives its positive consequences in the form of filling and execution of the budget. However, according to entrepreneurs, excessive pressure on entrepreneurs is exerted through the blocking of VAT. In addition, most of the temporary tax benefits will be valid only during martial law. That is, the time for the post-war recovery of the economy is not taken into account.
Financial and economic instruments stimulate the recovery of work and the creation of new entities of SMEs. These are mainly microcredit measures and targeted grants. As for information and consulting tools, the majority are platforms and chatbots created for the purpose of coordinating activities and various types of legal consulting of subjects of economic activity. Special attention is paid to the reduction of the tax burden, the activation of entrepreneurial activities, the integration of Ukrainian business into the EU countries through the revitalization of export activities and informing about Ukrainian goods, services and innovative projects of the European consumer, legal consulting of Ukrainian entrepreneurs regarding the peculiarities of foreign economic activity. All these tools will allow further implementation of the draft plan of measures for the postwar recovery and development of Ukraine created by the government [18]. The main tasks of which are «Recovery, restart of the economy and institutions» for the period 2023-2025.
Another area of significant influence on adaptation is the implementation of corporate social responsibility (CSR) business tools. Recently, there has been an increase in business CSR, both in Ukraine and in the countries of the European Union. Ukrainian non-governmental organizations, individual entrepreneurs and specialists in various fields form unions to provide free information and consulting services, create chatbots and platforms to support mainly small and medium-sized businesses. Whereas foreign partners specialize mainly in financing Ukrainian enterprises and startups (Table 3).
Таble 3 Types of aid for business support by non-governmental organizations during military aggression
| Type of tool | Help |
| “Work4UA” is an online platform for supporting entrepreneurs who continue to work in war conditions. The “Work for Victory” project was created as the beginning of the country’s economic front and aims to attract financial support from beginning of the country’s economic front and aims to attract financial support from |
| foreign and Ukrainian citizens, companies and organizations for small and mediumsized businesses of Ukraine; | ||||
| KSE launched a $1 million talent and project support program for the competition. Any citizen of Ukraine can participate in the competition without any restrictions. The main task for the participant is to describe why your project needs help. The school provides a grant for the development of an idea without any bureaucracy and formal barriers. | ||||
| On December 16, 2022, the Board of Directors of the International Finance Corporation (IFC) supported the Ukrainian business financing program for $2 billion. USA, which is promising not only in terms of financing business needs, but also in increasing the level of favorable investment climate in the country. | ||||
| On December 21, 2022, the Entrepreneurship Development Fund (EDF) signed a Credit Agreement with JSC “UKRGAZBANK” in the amount of UAH 150 million as part of the project “Refinancing of energy-efficient investments of Ukrainian SMEs through the financial sector.” | ||||
| Acceleration program “Brave” for Ukrainian women who founded a micro or small business, or dream of starting their own business. According to the results of the offline program, the two best projects are chosen in the “Debutante” and “Visionary” nominations. The winners will each receive $5,000 in targeted financial assistance (before taxes and fees) under the She’s Next Empowered by Visa program to implement business initiatives. | ||||
| Checklist for restarting a business. The tool from the UA Anti-crisis initiative was created by participants of educational programs developed and implemented by the Institute of Marketing (Estonia). It will help to gather information about resources, build a strategy and take concrete steps to start a business with the aim of faster recovery of the economy of Ukraine. | ||||
| The Institute of Marketing (Estonia) in cooperation with the State University “Office for the Development of Entrepreneurship and Export” launched the business support project “Biz For Ukraine” for Ukrainian companies that have the opportunity to remotely provide service to foreign companies. | ||||
| The Buy Ukrainian platform for the promotion of Ukrainian brands on the markets of Europe and the USA. This is a non-profit platform created to help Ukrainian brands promote their products abroad. The platform was created by Maria Dovbna, a talent development manager at Danone, and Anastasia Ismailova, an IT specialist at WIX. | ||||
|
The Keep Going platform was created by IT entrepreneurs to provide first aid to owners of micro and small businesses, as well as people of creative professions who remained in Ukraine and continue to work. The project provides media, information, financial support and launches crowdfunding meetings. Teams of up to 50 people or family businesses affected during the war can apply for help on the KeepGoing.com.ua website. Website: keepgoing.com.ua |
||||
| Made with bravery – a marketplace for promoting Ukrainian exports, a marketplace for things made in Ukraine. The goal is to unite the best Ukrainian producers into a community, popularize Ukrainian products abroad and promote the export of Ukrainian goods. Priority is given to authors of unique authentic things. 5% of the cost of each purchased item is transferred by the marketplace to the United24 fundraising platform. The special commission of the platform directs these funds to the currently relevant programs for the reconstruction of Ukraine. In addition, when paying with a Visa card, an additional 5% of the purchase price is also transferred to United24 to support the reconstruction of the state. | ||||
|
Free legal assistance to Ukrainians during the war from the “YurStab” organization. Lawyers of Ukraine united and created an initiative called “Legal Headquarters of Ukraine” to provide free legal assistance to Ukrainians. Telegram chatbot @ua_law_help_bot has been developed. In the chatbot, citizens can communicate with lawyers in real time and in the format of live correspondence and receive consultations on the following issues: mobilization: the status, rights, obligations, guarantees of persons participating in military operations or TrO; border crossing: entry and exit of people, removal of property, money; internally displaced persons: obtaining status, payments, other assistance; business under martial law: contractual relations, taxes, registration, relocation; labor relations: rights and responsibilities of employees and employers, guarantees, opportunities under martial law; immigration to Great Britain; other: family issues, charitable assistance, humanitarian assistance. |
||||
Source: [3, 4, 11]
Foreign countries provided strong support to the energy infrastructure of Ukraine in the winter of 2022-2023, providing significant financial funds and energy equipment. Therefore, industrial enterprises were able to continue their work. In addition, active financing of business initiatives continues.
Conclusions. The analysis carried out in this way allows us to conclude that the activities of business entities during the hostilities became more complicated and require adaptation mechanisms. Analysis of static monitoring proves that large business shows greater adaptability, while SMEs suffer significant losses. According to the results of 2022, almost 20% of business entities have ceased their activities, but the majority of enterprises continue to adapt to new circumstances, attract reserves to support their activities, carry out transformation or relocation of their facilities, resources, and production capacities. Attacks on energy infrastructure continue to destroy business, paralyze the life of enterprises, citizens and the economic system as a whole. In view of this, it is advisable to focus further research on the formation of strategies and tactics for the implementation of programs for financing investment projects in the field of energy supply, the implementation of credit and grant state mechanisms, the monitoring of their results and adjustments in accordance with the goals facing the state – the preservation of entrepreneurial potential and its multiplication.
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