Economically, Ukraine has had a good year in 2023. Top investment bank Concorde Capital has forecasted that Ukraine's GDP will grow by approximately 6% in 2023 after a heavy contraction in 2022.

However, the outlook for 2024 is more modest, with economic growth not expected to exceed 3% per year as the poor progress in the war and shrinking levels of international support weigh on the economy. Ihor Mazepa, the CEO of Concorde Capital, emphasised that external support from Western partners has been crucial in preventing Ukraine from returning to the economic hardships of the 1990s, but in November the government was already working on a plan B should the West fail to come up with the $43bn the government needs to keep the lights on.

Ukraine’s war funding is in increasing doubt after Congress failed several times to pass a spending bill that includes $61bn of funds for Ukraine. An EU package of €50bn is also facing difficulties as several Central European countries are both tired of funding Ukraine and of the economic damage sanctions are doing to their own economies.

Ukrainian President Volodymyr Zelenskiy is adamant that Ukraine will not enter into peace talks with Russia, but it may be forced on Kyiv at some point in 2024 due to falling support. Plan B is a phased action starting with spending cuts and finishing with turning on the printing presses to fund the war if resources get too low.

However, in the short-term the government is funded for the rest of this year and into the first quarter. Consumer demand is currently driving economic growth but nevertheless Ukraine faces a raft of huge challenges, including the loss of industrial capacity and human capital after about 8mn Ukrainians fled the country.

Slower GDP Growth in October, but Positive Signs in Industry In October 2023, Ukraine's real GDP growth slowed to 6.5%, down from 11.1% in September. This deceleration was attributed to a lower contribution from agriculture due to the higher statistical base in October of the previous year. The Institute for Economic Research (IER) noted that real GDP in October 2023 was 28% lower than in October 2021.

However, there were positive indicators in the industrial sector, where real gross value added (GVA) grew by 16%. This growth was driven by improvements in metallurgy and mechanical engineering. The business community remains optimistic and intends to increase production, as indicated by survey results. Nevertheless, October's exports, particularly road transport, were limited by Poland's policy, and a truckers' strike that began on November 6 has added to the challenges.

Additionally, the trade deficit reached a new historical high in October, while inflation decreased to 5.1%.

The International Monetary Fund (IMF) recently upgraded its forecast for Ukraine's economic growth in 2023. Initially predicting a range of 1-3% in July, the IMF now anticipates Ukraine's GDP growth to reach 4.5%. Gavin Gray, an IMF official, noted the country's remarkable resilience and signs of stabilisation, attributing the stronger-than-expected economic recovery to recent developments.

Ukraine's agricultural sector is showing promise, with the $A updating its forecasts for the 2023/2024 marketing year. The forecast for corn production has increased by 1.5mn tonnes to 29.5mn tonnes, with exports expected to reach 20mn tonnes. Wheat production is projected to remain stable, while exports are set to increase by 1mn tonnes to 12mn.

The problem remains getting Ukraine’s grain to market. A temporary corridor has been opened along Ukraine’s coast to the EU market that allows some seaborne exports. Poland and its neighbours have blocked the rail and road routes to the west thanks to the impact it has had on the local economies. Together this means that despite a bumper harvest, Ukraine’s grain exports are down by a third, which is hurting and the trade balance went back into deficit.

November’s blockade of the Polish-Ukrainian border may have substantial economic consequences, with potential damages estimated at up to $400mn. Disruptions in the supply of Ukrainian goods via truck through Poland are expected to affect both exports and imports. The National Bank of Ukraine (NBU) calculated that road transport accounted for approximately 35% of exports and 70% of imports in 2023.

In October 2023, imports into Ukraine increased to $5.64bn thanks to recovering incomes, while exports remained relatively stable at $2.68bn, according to customs data.

As for the war, Ukraine’s top general controversially said it has reached a stalemate and now winter has set in, little change is expected on the battlefield until the spring.

As of the start of December Russia launches its largest ever drone strike against cities in Ukraine hoping to overwhelm Ukraine’s air defences. The attack was largely unsuccessful with the Armed Forces of Ukraine (AFU) shooting down 71 of the 75 drones. However, the attack highlighted that Russia is clearly planning to target Ukraine’s power and heating infrastructure over the winter in the hope of freezing the population into submission.

Russia’s economy is now on a full war footing and it is producing more shells, while Ukraine is running out, and increasingly sophisticated missiles and drones. The West has promised to counter this threat with increased air defence supplies.