Although the Ukrainian economy is dependent on global trends, the impact of external factors will be less tangible compared to the development of the war and the volume of international financial aid. Russia's war against Ukraine continues, and the prospects for a full-fledged ceasefire remain uncertain. Therefore, Dragon Capital maintains two possible scenarios of macro forecast for 2025, write Dengi.ua .
The "ongoing war" scenario envisages the prolongation of hostilities until the end of the forecast period, while in the "ceasefire" scenario experts assume that a sustainable ceasefire will be reached in the coming months, but part of Ukraine's territory will remain temporarily occupied.
Available indicators of economic activity suggest that it slowed down at the beginning of the year amid new losses of production capacity, as well as due to negative consumer reaction to geopolitical tensions.
Although the weakness in economic activity in Q1 2025 will be partially offset by better prospects for the energy sector, analysts cut their forecast for real GDP growth in 2025 by 0.5 pp, to 2.5% in the "ongoing war" scenario.
In case a durable ceasefire is agreed upon, real GDP could grow by 3.5-5.5% YoY (0.5 p.p. below previous expectations) due to improved economic sentiment and the start of a large-scale recovery to offset defense spending cuts.
According to Dragon Capital's forecast, annual inflation will start to decline in June-July on the back of continued easing of fundamental pressures and a high comparison base in the food segment in the second half of last year. Consumer inflation is expected to slow to 8.1% y/y by end-2025 in the "ongoing war" scenario and to 9-10% y/y in the "truce" scenario.
At the same time, the fiscal deficit could narrow to $40 billion (20% of GDP) in 2025 from $44 billion in 2024 mainly due to tax changes enacted in late 2024 that generate an additional $3 billion in tax revenues.
However, in the event of a sustained ceasefire, the budget deficit could shrink to $34bn or 16% of GDP.