The European Bank for Reconstruction and Development (EBRD) has downgraded its growth forecast for Ukraine's economy in 2025 from 4.7% to 3.5%. This is stated in the bank's main report. According to UNIAN, this information was reported by Kontrakty.UA.
"Despite the pressures of the full-scale war with Russia, Ukraine's economy, which grew by 3% in 2024, is projected to grow by 3.5% in 2025 and strengthen further to 5% in 2026, provided a ceasefire agreement is reached this year," the document states.
It is noted that the EBRD has revised its previous growth forecast for Ukraine in 2025 downwards by 1.2 percentage points.
"Although Ukraine entered 2025 with external financing secured for the year, it has faced a slowdown in economic growth and rising inflation due to the impact of the war that began with the Russian invasion in February 2022," bank specialists say.
According to the report, the continuation of the war and Russia's massive attacks on Ukraine's energy infrastructure have caused both an electricity deficit, forcing Ukrainians to pay high prices for imported electricity, and a severe labor shortage. Real GDP growth has noticeably slowed from over 5% in the first half of 2024 to approximately 2% in the second half of the year.
It is noted that the resurgence of inflation in the second half of 2024 was driven by rising electricity costs, adjustments to regulated utility prices, rapid increases in real wages, and currency devaluation against the US dollar following the easing of the exchange rate peg in October 2023.
"Annual inflation reached 12% in December 2024 and is likely to remain at this level in the first half of 2025 before falling to single digits by the end of the year," the report states.
The budget deficit for Ukraine in 2025 is projected to be 19.4% of GDP and will be fully financed through external budget funding amounting to $38.4 billion. This includes $13.7 billion from the EU under the Ukraine Mechanism, $22 billion from G7 countries based on revenues from frozen Russian assets, and $2.7 billion from the IMF.
Negative factors that hindered growth in the second half of 2024 are likely to persist in 2025, according to the EBRD.
"On the positive side, confirmed resilience and adaptability of enterprises, a well-functioning Black Sea trade corridor, strong government consumption stimulus, and increased military procurement from domestic industry are expected to contribute to economic growth," the bank believes.
Latest News on Ukraine's Economy
According to the assessment of the Institute of Economic Research (IER), Ukraine's GDP grew by 2% in January, compared to a growth of 1.6% in December 2024. The Ministry of Economy, however, estimated GDP growth in January at 1.5%, while in December of the previous year it was 1.7%. Notably, January saw declines in sectors such as mining and transportation.
The total cost of reconstruction and recovery in Ukraine is $524 billion over the next decade. This is approximately 2.8 times the projected nominal GDP of Ukraine for 2024, the World Bank reported.