Challenges and opportunities of territorial community economies during wartime: an analytical assessment of the adaptive potential of local development (the case of the Chortkiv city territorial community)

Анотація

Introduction. The full-scale war has shifted the functioning of territorial communities into a regime that combines basic continuity with a constrained development margin under the influence of security, energy, demographic, and institutional–fiscal shocks. Under these conditions, descriptive budget indicators fail to provide causal interpretation, as they do not distinguish between a community’s internal capacity and external shock pressure, which alters the effectiveness of identical managerial decisions. Purpose. To develop and empirically test an integrated, regime-based model for assessing the adaptive potential of a territorial community during wartime, combining internal capacity and shock pressure and enabling the interpretation of development outcomes as the realization of potential under external constraints. Methodology. A composite approach with min–max normalization of heterogeneous indicators over 2021–2024 is employed. Internal capacity is aggregated into the Capacity? index as a weighted sum of the structural quality of the economic base (EconBase, constructed using CR2 and HHI), fiscal capacity (FiscalCapₜ, derived from the shares of own and tax revenues, autonomy from transfers, the relative budget balance, and the share of capital expenditures), and normalized institutional adaptability (Adaptₜ*, based on documented proxy indicators). Shock pressure (Shockₜ) is constructed as an integrated index encompassing the energy component (SAIDI), a discrete security shock, demographic pressure (internally displaced persons), and an institutional-fiscal break (loss of “military” personal income tax). The final local development outcome is defined multiplicatively as LEOₜ = Capacityₜ · (1 − Shockₜ). Results. Empirical testing reveals a regime-based dynamic. In 2021-2023, the integrated indicator LEOₜ increased (0.174; 0.261; 0.464) amid improved fiscal manageability and moderate shock pressure. In 2024, LEOₜ declined sharply (0.093) despite maximum institutional adaptability, due to the overlap of the most severe energy constraint and an institutional–fiscal shock (withdrawal of UAH 37.7 million in “military” personal income tax), accompanied by a fall in the fiscal index. The results quantitatively confirm that institutional actions are a necessary but insufficient condition for development without reducing dominant shock channels. Conclusions. The proposed model provides a reproducible integrated assessment of a community’s adaptive potential and enables identification of transitions between “adaptive–developmental” and “continuity” regimes. Practical implications include prioritizing policies aimed at reducing revenue-base volatility and shock pressure–primarily through strengthening energy resilience and diversifying endogenous revenue sources.

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