Ukraine country - May, 2024

May 1, 2024

The US House of Representatives passed a crucial foreign aid package worth $61bn for Ukraine, Israel, and other allies on April 20, following months of political wrangling and escalating tensions on the battlefield.

Ukrainian President Volodymyr Zelenskiy welcomed the move, praising the US House for its decisive action. "Certainly, we will use American support to strengthen both our nations and bring a just end to this war - a war that (Russian President Vladimir) Putin must lose," Zelenskiy said.

Zelenskiy also said at potential bilateral security agreements with the United States, Nordic, and Baltic states oculd be signed in the near future.

Highlighting the importance of US aid, Zelenskiy underscored its role in bolstering Ukraine's armed forces and providing a much-needed chance at victory. "I think this support will really strengthen the armed forces, I pray, and we will have a chance at victory if Ukraine really gets the weapons system, which we need so much, which thousands of soldiers need so much," he stated.

What remains unclear is how fast fresh military supplies can be delivered to Ukraine. Its air defence has more of less collapsed for the lack of ammunition leaving cities and power facilities vulnerable to the intense Russian missile barrage.

According to Zelenskiy, in March the Russian Federation launched more than 400 missiles of various types and approximately 600 Shahed drones into the cities and villages of Ukraine in just one month. In addition, the enemy used more than 3,000 guided aerial bombs. Much destruction is currently being wrought on Ukraine energy sector.

Likewise, the lack of shells and growing swarms of Russian drones is putting the Armed Forces of Ukraine (AFU) under intense pressure as Russia’s forces make slow but steady advances, albeit at a great cost in casualties.

In the forthcoming months, the war in Ukraine will enter a critical juncture. Ukraine faces a daunting challenge, grappling with an imminent escalation in Russian military offensives while simultaneously contending with significant manpower and ammunition shortages. Russian President Vladimir Putin is anticipated to capitalise on the current tactical advantages Russia holds, with plans to amplify military actions in 2024, aiming to solidify gains before the strategic landscape potentially shifts in 2025.

The new US money more or less solves Ukraine’s funding problems for the rest of this year. According to the Ukrainian government, the need for international financing in 2024 is $37.2bn. As of April 20, Ukraine has received $10.2bn and may be short about $14bn this year, but falling inflation means that a lot of this can be raised on the domestic market and the banking sector is flush with liquidity at the moment.

But questions are being raised about future funding, with some analysts speculating this will be the last US funding package. All eyes are on the US presidential election in November which will determine Ukraine’s fate.
In the meantime, the economy is performing well although the damage to the energy sector is expected to have an impact later this year.

The government said GDP growth accelerated in March to 4.6%, but analysts predict a further decline. Growth is supported by stable seaport operations, which have stimulated activity in railway transport, metallurgy, and mining of metal ores. There was an improvement in business sentiments, and the revival of consumer activity as well.

However, the ICU investment group worsened its forecast for the growth of Ukraine's economy for 2024 from 5% to 4.1% due to Russian attacks on infrastructure, but at the same time improved the inflation forecast from 10.1% to 6.4%.

The Ukrainian economy has reached a turning point, according to the World Bank’s regional Economic Review. The Ukrainian government predicts the improvement of key macroeconomic indicators and economic growth, whether the war ends in 2024 or drags on longer.

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