Influence of FDI on structural changes in the economy in the context of prospects for post-war recovery of Ukraine

Abstract

The recovery of the national economy, which is undergoing great destruction as a result of full-scale Russian aggression in Ukraine, will require attracting not only domestic but also foreign investments. The post-war experience of various countries shows that the inflow of foreign capital contributed to meeting the needs for investment resources for the reconstruction of the economy and its structural modernization. The recent history of the rapid rise of newly industrialized countries also demonstrates that foreign investments enable the transformation of the structure of the host economy, and its progress towards higher levels of industrial development. The purpose of this study is to conduct an analysis of the accumulation and sectoral distribution of FDI in the Ukrainian economy, to assess the effects of FDI to change the structure and dynamics of economic growth, and to identify approaches to attracting foreign investment in the context of prospects for post-war recovery and economic restructuring. The article examines the accumulation of FDI in the Ukrainian economy in historical retrospect, analyzes the distribution of their reserves among the sectors and subsectors, as well as their geographical origin. The author assesses the depth of penetration of the FDI into the economy in general and into the technological sectors within the processing industry, in particular, and reveals various contradictory effects created by foreign investments for the development of the national economy, technological progress, and economic security. Using regression modeling, the article investigates the FDI as a factor capable of contributing to the transformation of Ukraine’s economy, and changing the structural distribution of added value and employment between sectors. The simulation results confirm that the accumulation of FDI really affects the dynamics of GVA production and employment in economic sectors, that is, it causes structural shifts in the economy. At the same time, sectoral assessments reveal the mixed effectiveness of this factor in terms of the strength and direction of changes in the structure of the economy.