Putin may be angry. Ukraine tells us its “Plan B”

In a month and a half, it will be two years since Russia launched a full-scale invasion of Ukraine (the war itself started in 2014, by kidnapping. Crimea). Despite initial bad predictions, the country did not collapse and still maintains control over its territories.

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However, a slow reconstruction process began in 2023, as Serhiy Nikolaychuk, Vice President of the National Bank of Ukraine (NBU), told money.pl. This is shown by the data of the State Statistical Service GDP increased by 9.3% in the third quarter., although the NBU estimated it at 8.2 percent. In addition, compared to the second quarter, the increase was 0.7%.

Data in recent months suggest that Ukraine's economy has shifted to operating in war mode, as noted by Yaroslav Trofimov of The Wall Street Journal commenting on second-quarter data (then GDP grew 19.5% year-to-date). year).

However, we must remember that in the case of annual data there is a so-called base effect. The data of the two mentioned quarters of 2023 are compared with the corresponding periods of 2022. Then we were dealing with a collapse (gross domestic product decreased by 36.9% in the second quarter and by 30.6% in the third). Nevertheless, our interlocutor remains cautiously optimistic and emphasizes this In October, the NBU revised its GDP growth forecast for the whole of 2023 from 2.9 percent. to 4.9 percent

A number of factors influence the rapid pace of economic recovery. These include: a better harvest compared to forecasts, more alternative export routes and higher budget costs, explains Serhiy Nikolaychuk.

He also emphasizes that the recovery of the country's economy is influenced by Ukrainian enterprises and households that have “adapted to the challenges of the war”. He also cited the example of much higher than expected grain and raw materials thanks to the new maritime corridor in the Black Sea.

– The stable operation of the new sea route will contribute to a higher rate of economic growth both in the short term and in the long term – our interlocutor summarizes this topic. – Moreover, the implementation of large-scale reconstruction projects can significantly accelerate the economic recovery of Ukraine, – he adds.

Thanks to increased budget spending, Ukraine is trying to stimulate its economy. That's why This year's draft budget envisages a record deficit of UAH 1.58 trillion (about 41.5 billion US dollars).

“This means that Defense spending exceeds recovery goals” – said Slavomir Matushak in the comment.

– Developments in the security situation, especially the duration of hostilities and their nature and intensity, represent the most important economic risk.. Extreme uncertainty remains about the duration and intensity of full-scale war – admits the vice-president of the NBU.

The baseline scenario of the NBU's October macroeconomic forecast is based on the assumption that the high level of security risks will remain until the end of 2024. This direction corresponds to the majority of expert opinions and at the same time corresponds to the assumptions that create. Underlying the draft budget for 2024, in which significant spending was allocated to maintain defense capabilities throughout the year. If hostilities continue longer, the NBU expects additional economic losses and strong inflationary pressure, adds Serhiy Nikolaychuk.

However, it should be noted that the inflation rate has been giving positive signals recently. Even at the beginning of 2023, the figures were over 20%. In November, inflation in Ukraine amounted to 5.1%. from year to year (although in this case the so-called base effect also appears).

In addition to the uncertainty related to the duration of the war, our interlocutor briefly mentions several other problems facing the economy. They are:

• reduced and/or less regular international aid provision (to which we return);
• Emergence of additional budgetary needs (to maintain defense capabilities, eliminate the consequences of terrorist attacks, etc.) and a significant quasi-fiscal deficit, in particular, in the energy sector;
• significant damage to port and energy infrastructure, which will limit exports;
• Strengthening of unfavorable migration trends.

The issue of migration has become one of the most urgent problems in recent weeks. A large group of Ukrainians of working and mobilization age is outside the country. Finance Minister Serhii Marchenko, quoted by the website “Rzeczpospolita” citing the Unian agency, estimated in August 2023. The country loses 2 billion dollars every month due to population outflow.

At the end of the year, the Council of Ministers presented a draft law, which provides – in addition to lowering the upper limit of the mobilization age from 27 to 25 years – among other things: Permanent registration abroad of men subject to compulsory military service and increasing penalties for evasion of military service – noted OSW in its report.

However, the longer the war drags on, the less people will become a bigger problem for the country.

The NBU recognizes the risk of not receiving international assistance, which has somewhat increased recently. Moreover, the risk related to the regularity of the inflow of external financial assistance has already been partially realized. However, the NBU expects that external financing will begin to flow regularly in the near future – Serhiy Nikolaychuk comments.

He also emphasized that his country has achieved “significant progress in cooperation with the International Monetary Fund”. It also successfully completed the second review of the Enhanced Fund (EFF), which supports countries in need. “Ukraine is not going to deviate from the obligations under the program next year,” he assures us.

The IMF program is tied to a $122 billion international support package. Successful check Guaranteed another tranche of USD 900 million to Ukraine.

Ukraine does its homework efficiently and expects to fulfill its obligations from international partners. The successful completion of the IMF program review is seen as a form of reassurance to our international partners. We see the readiness of the International Monetary Fund to find ways to solve this issue if the risk is realized and its readiness to maintain the leadership in the collection of foreign financing, emphasizes Serhiy Nikolaychuk.

At the same time, he claims that work is underway on “Plan B”, which provides: Mobilization of budget revenues, use of internal debt generation resources and designation of priority sectors (primarily defense).which will receive financial support first. This plan envisages maintaining financial stability on a macro scale, with banks supporting the country.