Page 5 - Ukraine OUTLOOK 2024

For its part, the Kremlin has said that it is not interested in starting peace talks and it is widely believed that Russian President Vladimir Putin wants to wait to see the outcome of the presidential elections in November first. At the time of writing, former President Donald Trump was leading the deeply unpopular Biden in the polls and has said that he would “quickly end the war in Ukraine” as well as take the US out of Nato.
In the event of the end of Western support, Ukraine’s government has worked out a contingency Plan B that boils down to turning on the printing presses to pay for the government’s operations, a course of action that was employed in the first six months of the war and which will buy some more time. But that would also dramatically undermine the health of the economy and is not a sustainable solution.
Nevertheless, life in much of the country not close to the front line on the Dnipro is returning to normal. Businesses are reopening, and the war damage in the rest of the country is being repaired.
The main obstacle to growth is remaking the transport sector to get Ukraine’s key exports – grain and metal – out of the country to international markets.
Ukraine enjoyed a bumper harvest in 2023, but grain exports were down by a third due to Russia’s naval blockade on Ukraine’s main ports. Kyiv found a workaround via a temporary corridor that leads to the Danube where goods can be shipped to Europe, but this route remains under the threat of Russian bombers.
Likewise, more goods are being exported by truck, but a dispute with Poland, due to the waiver of permit restrictions in 2022, closed the border in November. An earlier dispute that broke out in April 2023, after the Polish market was flooded with cheap low-quality grain, also resulted in a ban on imports of Ukrainian grain that has also cut into Ukraine’s desperately needed foreign exchange reserves.
If the status quo is maintained then Ukraine is expected to continue on its recovery path; however, the downside risks due to the war are extremely big. Ukraine is on track to register 5% growth in 2023, but the NBU forecasts GDP growth will slow to 3.6% in 2024, while in 2025, if security risks are reduced, the expected GDP growth may accelerate to 6%.
Even if the war stopped in 2024, Ukraine faces a Herculean rebuild challenge. It needs to persuade millions of refugees, now comfortably settled in EU countries such as Germany, to return home, as the economy is already suffering an acute labour shortage.
At the same time, hundreds of billions of dollars will have to be found somewhere to pay for reconstruction. The frozen $300bn of Central Bank of Russia (CBR) reserve money has been taken off the table over European property right law concerns, and the international financial institutions (IFIs) can only provide a fraction of the needed money. At the Recovery conference held in London in June 2023 Zelenskiy appealed to the private sector to invest, but as long as the threat of renewed Russian aggression remains, little international investment will arrive.
Underlying that risk is the fact that Ukraine still has a very serious corruption
5 UKRAINE OUTLOOK 2024 www.intellinews.com