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Significant assistance leads to signs of economic recovery, except in conflict-affected east

  • Key Message Update
  • Ukraine
  • February 2023
Significant assistance leads to signs of economic recovery, except in conflict-affected east

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  • Key Messages
  • Key Messages
    • After withdrawing from the southern city of Kherson in November 2022, Russian forces have gained little ground. In the second half of February, however, Russia intensified efforts to capture the small eastern city of Bakhmut in Donetsk oblast. Around 300,000 Russian reserve troops have been trained in recent months, with tens of thousands of reservists and Wagner troops being sent to support the Bakhmut offensive. Intelligence officials assess that Russia aims to capture remaining parts of the Donetsk region, and the capture of Bakhmut would allow Russian forces to continue westward toward Kramatorsk and Slovyansk cities. According to Ukrainian commander Denis Yaroslavskiy, only 2,000 civilians remained in Bakhmut as of early February, and they will likely continue to largely depend on humanitarian assistance while residing in shelters until it is safe to move again.

    • In February 2023, monthly exports of agricultural commodities reached pre-invasion levels for the first time, reversing the decline recorded in January 2023 due to delays in inspections. According to data from the State Customs Service of Ukraine as of March 1st, Ukraine exported 5.2 million tons of cereals and legumes in February, three percent more than February of last year. However, despite recent progress, only a total of 32.3 million tons of cereals and legumes have been exported to date in the 2022/23 marketing year (July 2022 to June 2023), which is 26 percent less than in the same time period of the previous year; this is driven by a 37 percent decline in wheat exports. While the Safe Grain Corridor deal is set to expire on March 30th, UN and Ukrainian officials expect it will be extended beyond this date.1 The steady increase in export volumes is one factor that has contributed to the stabilization of global cereal markets and declining prices in the second half of 2022 and early 2023. The increase in exports has also improved access to income for Ukrainian farmers.

    • According to the Ukrenergo National Power Company, Ukraine’s energy system has been operating without any energy capacity deficit for 18 days as of March 1st. For several months prior, Russian attacks on energy infrastructure had been resulting in the need for regularly scheduled blackouts across the country due to capacity deficits. These blackouts left citizens who do not own generators vulnerable to the cold temperatures, while also disrupting economic activity in the manufacturing sector. The recent improvement in the energy supply is attributed to the rapid speed at which Ukrainian personnel are repairing damage caused by ongoing Russian attacks, supported by significant foreign financial assistance. For example, after Russian shelling damaged critical heating infrastructure in Kherson on February 23rd, the thermal power plant was able to quickly resume operations by February 27th.

    • The economy of Ukraine contracted by an estimated 30 percent overall in 2022 due to negative impacts of the war. However, significant foreign assistance and government spending – including for social assistance programs and military salaries – has prevented additional decline. Total foreign assistance for budgetary and military spending amounts to tens of billions of dollars, and the US began to disburse 9.9 billion USD in additional aid in February to support the budget of Ukraine through September. The World Bank has also announced an additional 2.5 billion USD of budgetary support. This is expected to temporarily alleviate concerns about economic collapse.

    • High concern remains for food insecurity among poor households and pensioners in front-line areas and in some Russian-occupied areas, where the ability of the Ukrainian government to provide support is restricted. Across the rest of the country, however, economic activity in Ukraine is exhibiting signs of recovery, largely bolstered by the abovementioned external financial support. After nearly one year of war, many Ukrainian businesses have been able to adapt to new conditions. According to data from Ukraine’s European Business Association, even by May 2022, 47 percent of the association’s members (foreign and Ukrainian businesses) had reported fully restoring operations and 50 percent reported working with some limitations. More recently, small businesses that are able to operate on power from generators have proven resilient to the attacks on energy structure that have been ongoing since September. Additionally, social and humanitarian assistance continue to provide a significant source of income to many Ukrainian households.

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    This report covers events in February; however, it should be noted that, on March 18, the UN and Turkey announced that the Safe Grain Corridor deal would be extended for another 60 days.

    This Key Message Update provides a high-level analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography. Learn more here.

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