Ukraine’s economy grew by 3.0% in 2024, despite the ongoing full-scale war with Russia. However, GDP growth in 2025 is projected at 3.5%, with a possible increase to 5.0% in 2026 - assuming a ceasefire agreement is reached this year.
These forecasts come from the European Bank for Reconstruction and Development (EBRD) in its flagship Regional Economic Prospects report.
The EBRD revised its 2025 growth forecast downward by 1.2 percentage points compared to its September 2024 projection, which had expected 4.7% growth.
Despite secured external funding for 2025, Ukraine faces slowing economic momentum and rising inflation due to war-related factors: destruction of energy infrastructure from Russian attacks, electricity shortages, rising import prices, and labor shortages.
Real GDP growth slowed significantly in the second half of 2024 - from over 5.0% in the first half to about 2.0% in the second - resulting in an overall 3.0% annual increase. Inflation accelerated due to higher electricity tariffs, revised regulated utility prices, rising real wages, and weakening of the hryvnia after the October 2023 removal of the fixed exchange rate.
By December 2024, inflation had reached 12% and is expected to remain at this level through mid-2025 before declining to single digits by year-end. In response, the National Bank of Ukraine raised the key interest rate twice - from 13.0% to 14.5% - indicating further tightening of monetary policy.
The 2025 budget deficit is expected to reach 19.4% of GDP and will be fully financed by external sources, totaling $38.4 billion. Key sources include:
- $13.7 billion from the EU’s Ukraine Facility;
- $22.0 billion from G7 countries via proceeds from frozen Russian assets;
- $2.7 billion from the IMF.
The same challenges that slowed growth in late 2024 are likely to persist in 2025. However, resilience in Ukrainian business, the effectiveness of the Black Sea trade corridor, robust domestic consumption, and growth in military procurement may support economic recovery.