September was marked by spectacular military successes for Kyiv and a stabilisation of the government’s financial position. The counter offensive launched at the start of the month around Kharkiv in the east caught Russia completely by surprise after months of hype that the attack would focus on the more exposed Kherson in the south, that is difficult to defend as it lies on the western side of the Dnieper river, Russia’s only asset in western Ukraine.

At the time of writing Ukraine’s forces were still pushing east into the Luhansk and Donetsk regions, retaking towns and villages previously held by Russia. The collapse of Russia’s position in the northeast around Kharkiv led to Russian President Vladimir Putin's decision to launch a “partial mobilisation'' on September 21, calling up at least 300,000, although Russian reports say that number could be as high as 1mn men.

While the media and Ukraine’s supporters made much of the success of the counteroffensive this was not the collapse of the whole Russian position as it remains in control of about 20% of Ukraine's entire territory. Moreover, despite the rapid advance of Ukraine’s forces they have not reached the February 24 line of contact that Russian proxies have held for eight years and is much better defended. Russian pundits say that it will take some two months for the fresh troops to arrive on battlefield and only then can Russia contemplate some sort of counterattack, but it almost impossible that Ukraine can take back all the occupied territory before then, so the war will continue and is likely to last all winter and longer.

Ukraine was running out of money but large macro financial aid packages from both the US and the EU arrived in September and has put the government finances on a more solid footing. At the same time the grain exports have been flowing out of Ukraine’s ports unmolested and should bring in another $20bn through to the end of the year.

Nevertheless finding will remain a difficult problem for this year and next. The new budget for 2023 has a $38bn deficit of which the government can only cover about $10bn and it will be entirely reliant on outside help to cover the rest. The west remains very reluctant to provide Kyiv with unsecured funds. There have been plenty of promises of more cash. The US approved another $12.5bn of aid and the EU has budgeted a similar amount. Kyiv applied to the IMF for an emergency $1.3bn and the World Bank will send $530mn before the end of the year, but all-in-all Ukraine will still be very short of funds even with all this help.

The economy is slowly starting to revive in the liberated parts of the country but Concorde Capital predicts a 31% GDP contraction this year, which is in line with the broad consensus. However, the outlook for 2023 is better with the bank predicting GDP growth of 8% in 2023 if half of the current negative factors are resolved by the end of 2022. Things like retail demand and purchase of cars have started to rise again after all the fighting became concentrated in the east.

Analysts cited commercial access to seaports and the availability of alternative routes, frontline movement, the number and consequences of missile strikes on Ukraine, the duration of air alerts, and the number of refugees and returnees as key factors in their GDP estimates. Concorde also estimates that inflation will reach 33-36% this year.

As for the budget, the company forecasts Ukraine’s expenses in the second half of 2022 at UAH 1.62 trillion. Ukraine will cover only 30% with its resources, so the financing needs will remain at $5bn per month.

Ukraine’s trade is also a problem after it fell by 40% y/y since the start of the war, although it has started to recover in recent months. The trade balance was deeply negative in April-June but was recovering strongly in August and September.