Ukraine country report - November 2023 - November, 2023

November 1, 2023

Ukraine's economy has displayed resilience and growth despite the ongoing conflict with Russia, with GDP expanding by more than 9% in September 2023 compared to the same month last year, according to the Ministry of Economy.

Over the first nine months of the year, the economy saw estimated growth of 5.3% compared to the corresponding period in the previous year. Minister of Economy Yulia Svyridenko attributed these positive results to businesses swiftly adapting to new challenges and continued support from international partners. Notably, the service sector, the food industry, mechanical engineering, and building materials production contributed significantly to the September GDP growth.

The trust of consumers and investors in Ukraine's economy has been rekindled, prompting increased consumer spending. Consumer consumption is expected to grow by 5% this year, leading to higher-than-anticipated spending and upward revisions in economic forecasts.

Despite a 29.1% contraction in GDP last year due to the conflict, this year is projected to witness a growth of approximately 3.5%. Ukraine's ability to adapt to wartime challenges, such as maintaining electricity supplies in the face of threats to energy infrastructure, has played a pivotal role in stabilizing the economy.

Minister of Economic Development and Trade Yulia Svyrydenko stated that Ukraine is on track to achieve a GDP growth of about 4% by the end of the year. Various sectors, including agriculture, industry, construction, and real estate, have shown positive trends, with mechanical engineering, food production, and furniture manufacturing experiencing growth rates exceeding 10%. Ukraine's macroeconomic stability has also resulted in falling inflation, from 26.6% in 2022 to 7.1% in September 2023.

The IMF predicts that Ukraine's GDP will continue to grow in the coming months, exceeding forecasts due to efforts to stabilize the macroeconomy and restore economic activity. The IMF anticipates that Ukraine's $115 billion international support package will progress as promised over the next four years.

While Ukraine's economy has rebounded from the depths of conflict-induced contraction, it remains reliant on external financial aid in the form of loans and donations. The EU, in particular, has been a major supporter, providing substantial financial assistance. The United States has played a key role in military support.
However, in recent months Ukraine’s finding is funding is increasingly in doubt as Ukraine fatigue grows and the new US Speaker of the House blows cold on continuing providing Ukraine with the same amount of financial support as has been available so far.

Likewise, this summer’s counteroffensive has apparently failed which has been fuelling the fatigue. Ukraine’s top general said that the war is now in a stalemate, leading many ask where the war goes from here. While it is unlikely that the West will abandon Ukraine or force Kyiv into early ceasefire talks with Russia – which show no signs of being willing to negotiate even it were approached – the changes that Ukraine will defeat Russia militarily are increasingly remote. That suggests the war will be protracted, lasting at least another year.

The 2024 budget draft aligns with economic projections, focusing on defence, security, and social protection, with an emphasis on military spending and international financing to cover expenditures. Public debt is expected to rise significantly, necessitating potential debt restructuring in 2024 as fiscal consolidation becomes a challenge

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