The Ukrainian economy is healthier than the Russian economy for the first time since the onset of Russia's full-scale invasion, according to several key indicators. However, in 2025, Ukraine will face new challenges. Reports TSN. This information comes from Kontrakty.UA.
This is noted in a review article by the reputable publication The Economist.
The publication states that the National Bank of Ukraine predicts a GDP growth of 4% in 2024 and 4.3% in 2025. The currency in the country is stable, and interest rates at 13.5% remain close to their lowest level in 30 months.
In contrast, in Russia, rates are expected to reach 23% soon to halt the decline of the ruble, banks appear fragile, and GDP is projected to grow by only 0.5-1.5% in 2025.
Will the Energy Sector Endure?
The main challenge for Ukraine's economy has been Russian strikes on energy infrastructure. However, as the publication notes, the country is now better prepared for such shocks. In particular, in December, electricity import capacities from the EU were increased by nearly a quarter, reaching 2.1 GW.
Head of the NBU Andriy Pyshnyy predicts that coping strategies and ongoing repairs will keep the average electricity deficit in the country at 6% of total demand in 2025 and at 3% in 2026.
Labor Shortage
The second issue is the labor shortage. Since 2022, mobilization, migration, and war have led to a reduction in the workforce by more than a fifth—down to 13 million people.
Demand is high: the number of job vacancies has reached 65,000 per week, compared to 7,000 in the early weeks of the war, but on average, each vacancy attracts only 1.3 applications, compared to 2 applications in pre-war 2021.
Budget Deficit
Finally, there is the issue of funding deficit. In 2025, the budget deficit is projected to be around 20% of GDP, but nearly the entire amount—$38 billion—will be financed from external sources.
In June, the G7 approved a debt package for Ukraine amounting to $50 billion, which is to be paid from the interest earned on Russian sovereign assets worth €260 billion ($273 billion), frozen in the West.
At the beginning of December, the U.S. transferred its share of $20 billion to the World Bank fund, which Ukraine can use for non-military purposes, although newly elected President Donald Trump may attempt to complicate Ukraine's access to these funds.
If the U.S. Stops Support
Ukraine is likely to manage without American funds in 2025. Along with the tranche of €18 billion that the EU has agreed to provide under the previous program, contributions from other G7 members are expected to fill the gap, predicts Dimitar Bogov from the European Bank for Reconstruction and Development.
Ukraine also has healthy foreign exchange reserves. They are expected to grow to $43 billion by the end of 2024, which corresponds to the import volume over five months.
However, if America withdraws, Ukraine could find itself in a difficult position in 2026. EU governments, struggling with limited funds and politically weak, as The Economist notes, may have difficulty covering another substantial bill.
Ukraine's ability to independently raise more funds is limited: a proposal to increase several taxes was withdrawn this summer after strong opposition.
It is worth noting that after the president signed the tax increase law in Ukraine, there has been a mass closure of individual entrepreneurs. Since the law came into effect, 22,500 entrepreneurs have ceased operations.