Ukraine Defies Russian Attacks with 5.3% Economic Growth in 2023

Ukraine’s economy showed strong growth of 5.3% last year despite ongoing Russian missile and drone attacks. This growth was driven by the country reasserting control of a Black Sea export corridor and harvesting a bumper crop. In the last quarter of the year, the economy expanded by 4.7%, marking the third consecutive quarter of growth. This positive trend comes after the economy shrank by almost 30% in 2022 due to the invasion ordered by Russian President Vladimir Putin.

Despite the damage caused by Russian attacks to infrastructure like the power grid, ports, and railroads, Ukraine has seen growth return as agricultural exports resume and businesses adapt to new demands. However, the International Monetary Fund (IMF) has warned that the economy may face challenges in 2024, with growth expected to soften to 3%–4% due to uncertainty surrounding the ongoing war and supply constraints.

Challenges persist for Ukraine, as there are delays in foreign aid from the US and the EU, testing the country’s ability to defend itself and fund its budget. Additionally, there are concerns about a labor shortage and the struggle to maintain manpower in the army to defend against Russian advances. Despite these challenges, bondholders are eagerly awaiting the economic data as Ukraine seeks to overhaul its debt before a two-year standstill expires later this year.

The data on gross domestic product will also determine the government’s payout on securities linked to economic growth, known as GDP warrants, if they are excluded from the restructuring deal. These warrants are currently trading at high levels, above 56 cents on the dollar, since the start of the war. These factors point to a complex economic situation for Ukraine, as it navigates both internal and external challenges to sustain growth and stability.