Ukraine: Macroeconomic Outlook 2024-25
Together with the Institute for Economic Research and Policy Consulting (IER) in Kyiv, we have modelled macroeconomic developments for this year and the coming year. Our analysis suggests that although the Ukrainian economy has returned to a growth path, the war is exacting a high economic price. Moreover, forecasting in a highly volatile environment is fraught with uncertainty.
- Following the massive collapse of the Ukrainian economy as a result of Russia’s war of aggression, the Ukrainian economy started to grow again from 2023, driven mainly by private consumption and investment (especially in the defence sector and replacement investment for war destruction). Nevertheless, the real output of the Ukrainian economy is still up to 20% below pre-war levels.
- The fiscal situation remains tight: Projected expenditures will exceed projected revenues, necessitating continued financial support from Ukraine’s international partners. As the majority of international assistance is in the form of loans, Ukraine’s public debt will continue to rise.
- The negative trade balance is partly due to continuing difficulties in using existing export routes. Ukraine is now able to use a maritime corridor, which is a significant achievement. However, imports still exceed exports.
- The trade deficit is not fully compensated by transfers and remittances, resulting in a significant current account deficit.
- Inflation is expected to remain within the National Bank of Ukraine’s target range this year, but is expected to rise next year, driven by real wage increases (and the associated increase in private consumption).
The full outlook can be accessed here.
