As this month’s report goes to press Berlin has given the go ahead to send modern main battle tanks (MBTs) to Ukraine that could change the course of the war. As of the end of January a total of 174 have been promised which is more than a brigade of tanks. Of these there are firm commitments of 77 of which the first 28 are due to arrive in February and another 28 will arrive sometime in March. The tanks represent a major change in policy where the West will go from giving Ukraine defensive weapons to make sure it doesn’t lose the war to Russia, to giving it offensive weapons so that it can win the war. As bne IntelliNews has reported, the change in heart is partly due to the fact that following Russia’s partial mobilisation that started on September 21 the front line has stabilised and Russia was making incremental gains around the epicentre of the conflict in Bakhmut in Donbas. Tanks will likely break the deadlock. It also appears that fractures within the German government – German Chancellor Olaf Scholz doesn’t want to risk an escalation, but German Foreign Minister Annalena Baerbock is fully behind Ukraine – also helped Ukraine’s cause. Plus the Poles seemed to have outmanoeuvred Germany after Warsaw threatened to unilaterally send some its circa 250 tanks and present that to Berlin as a fait accompli. As Scholz had little response to that move, he persuaded the US to also commit to sending at least 31 of its Abrams MBTs. But it will take time to transfer the tanks to Ukraine and Russia is also clearly getting ready for a second mass mobilisation in the spring where some 500,000 new recruits are expected to be conscripted as a counter. The war could become a lot bigger and bloodier this summer as a result. In the meantime Ukraine’s economy continues to be pounded by shell and missile fire. Estimates for the drop in the economy in 2022 have been raised from 30% to 35%, caused by the drop in exports of everything from wheat to steel. Ukraine’s infrastructure has been smashed after a Russian campaign to make life a living hell for the population. Russian attacks on Ukrainian energy infrastructure have created issues with food storage. Ukraine can currently export only about 5 to 6mn tonnes of grain per month, down from nearly 8mn tonnes before the full-scale invasion. Beyond food exports, Ukraine has also historically been a major exporter of metals and raw materials. However, nearly all of Ukraine’s large factories producing steel and other key metals are located in the eastern part of the country and were severely damaged or destroyed by Russian attacks. In particular, Russians destroyed two large metallurgical enterprises located in Mariupol: the Azovstal and Ilyich iron and steel plants, which are now beyond repair, the owners told bne IntelliNews. Despite all of this damage to the Ukrainian economy, the war has prompted Ukrainians to quickly adjust and restructure parts of the economy, as companies relocate their operations or explore new business models. That has fostered an extraordinary amount of economic adaptability and creativity that is setting the groundwork for post-war reconstruction. Work has already started to prepare for a post-war recovery, but nothing concrete can be done until the situation on the battlefield is resolved. With relations between Moscow and Brussels continuing to deteriorate the two sides are further away from each other than ever and all business activity has either gone into survival mode or suspended. But the morale of the population is high and its determination to overcome Russia as resolute as ever. Support for Ukraine's accession to NATO has reached a historic high. In a referendum, 86% of Ukrainians would support this initiative, 3% would be opposed, and 8% would not vote, according to a study from the Rating group. In addition, 87% of respondents would support Ukraine's accession to the EU in the event of a referendum, with 3% against and 8% that would not vote. According to sociologists, support for joining the EU and NATO is almost unanimous among representatives from all macro-regions, age, and property groups. The economic outlook for this year is poor. The West has already agreed to backstop the estimated $38bn budget deficit in 2023 so the government can function. The National Bank of Ukraine (NBU) forecast for growth is only 0.3% in January as the economy remains on life support, but the regular upgraded its forecast for international reserves to $27bn this year and more international aid is expected to be committed over the year. Fitch Ratings forecasts the growth of Ukraine's economy in 2023 at 2% in 2023, as the war prevents the return of large numbers of refugees or large-scale investment, and power outages create an additional deterrent. Inflation is forecast to ease to 21% in 2023 from 26.6% in 2022, as the loss of manufacturing capacity, power shortages, and gradual elimination of supply chain disruptions offset weak domestic demand. At the same time, Fitch believes that the budget deficit will decrease to 15.2% of GDP in 2023 from 20.1% in 2022. Fitch also forecasts a rise in total public debt to 84% of GDP by the end of 2023 as a significant part of the money sent to Ukraine is in the form of loans not grants. The agency expects that the goal of attracting $38bn in external budget financing in 2023 will be fully achieved. And international reserves at the end of 2023 will be 3.8 months of current foreign receipts compared to 4.0 at the end of 2022. As of September 2022, the total amount of direct documented damage to residential and commercial real estate as well as other infrastructure amounted to more than $127bn. According to the assessment carried out by the Kyiv School of Economics, the largest share in the total volume of damages belongs to residential buildings ($50.5bn) and infrastructure ($35.3bn). However, estimates for the cost of rebuilding Ukraine is already well over $500bn and could rise as high as $1 trillion – some ten-times the value of the entire economy.