It has been exactly a year now since Russia initially invaded Ukraine, where they were met with destruction and violence. Ukraine's economy is in shambles due to the destruction of many buildings, homes, schools, and hospitals.
In 2022, the World Bank estimated that Ukraine's GDP fell an enormous 35% and that the population share of income that is below the national poverty line would likely take a large hike to 60%. This is up 40% since the most recent data in 2021. With these numbers in mind, the World Bank had taken the initiative in 2022 to help finance Ukraine during their efforts in a war they did not want. The emergency fund was roughly $13 billion dollars and was paid through grants, guarantees, and linked parallel financing. For reference, parallel financing is where multiple banks finance the same project and expenditures.
The International Monetary Fund (IMF) calculated that inflation in Ukraine ended at 26.6% in 2022. Given what we know about wars, it is very typical for inflation to sore during times of high government spending. Managing Director at IMF, Kristalina Georgieva, visited Ukraine last week and mentioned that she saw "an economy that is functioning, despite the tremendous challenges". She noticed that businesses were open and people were walking around; the economy was recovering slowly but surely. Georgieva restated her commitment towards Ukraine's war efforts and has streamed together $2.7 billion in emergency loans. At a G-20 meeting on Thursday of last week, the IMF is looking to move towards an even larger emergency fund of $10 billion in hopes to see a more "swift" recovery in Ukraine.
The United States is also committed to the recovery of Ukraine and has provided $76.8 billion in military and economic aid. Around $46.6 billion of it are grants, loans, and weapons and security assistance. The United Kingdom has given $5.1 billion in emergency loans and the European Union gave $3.3 billion in loans. But how much loan help is too much? When should Ukraine stop accepting these contributions from other countries? This answer will come down to a political decision within Ukraine.
Overall, we can expect Ukraine to slowly start its journey to a full economic recovery but it will not be easy. Ukraine is in a condition in which they will accept all the help they can get, and surrounding countries are showing their working efforts through loans and grants. We can expect GDP to grow in Ukraine within this upcoming year along with a decrease in inflation from a large 26.6%.
https://www.cnbc.com/2023/02/24/ukraine-prepares-for-the-biggest-reconstruction-since-world-war-ii.html
2 comments:
Great post Ryan! Not only are international and US institutions aiding the effort for Ukraine to rebuild, but also big corporate institutions are as well. President Zelensky and Larry Fink also met together recently and the two agreed on an investment project that would allow for Blackrock to be a huge contributor in the reconstruction of Ukraine. It will be interesting to see which of the companies tht Blackrock owns decide to play a big role in this rebuilding process.
The biggest thing that could effect Ukraine in the future is the length of the war. There seems to be no end in sight and Russia will not back down until it takes over the country. Countries are willing to help aid Ukraine now, but what about 5-10 years in the future? These are the things that the world and Ukraine need to focus their planning on.
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