Ukraine’s cabinet of ministers projects accelerated GDP growth for 2025-2026
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The Ukrainian government estimates that Gross Domestic Product (GDP) growth will reach 4.6% in 2024 and 6.8% by 2025, the Cabinet of Ministers announced on Dec. 21.
According to a macroeconomic forecast, adopted by the government resolution № 1315 of Dec. 15., inflation is expected to slow down after increasing to 9.7% in 2024. It is projected to decrease to 8.1% in the following year and further to 6.9%.
The document also foresees real wage growth over the next three years by 8.5-9.1% annually, with a reduction in unemployment from 18.7% to 15%, and an increase in the number of employed Ukrainians – from 12.3 million to 13 million.
Meanwhile, by 2025, a slight reduction in the overall wage funding for employees and military personnel is anticipated — from 2.35 trillion UAH ($62.5 billion) to 2.32 trillion UAH ($61.8 billion), likely due to the expected end of the full-scale war.
Additionally, the government expects a reduction in the foreign trade deficit from $40.2 billion in 2024 to $27.0 billion in 2025 and $25.4 billion in 2026. This is expected to occur due to accelerated export growth – 9% by 2024, 19.4% in 2025, and 20.6% in 2026, while imports are expected to increase by 5.9% next year and then decrease by 2.3% in 2025 before jumping by 13% a year later.
Previously, the International Monetary Fund (IMF), in the second review of the Extended Fund Facility (EFF) program with Ukraine, included the possibility of a negative growth scenario if Russia's full-scale war against Ukraine continues throughout 2025.
In that scenario, GDP growth of 3-4% in 2024 would shift to a decline of 5% and a zero rate in 2025 – instead of a 6.5% increase under the base scenario.
Inflation, in case of a prolonged war according to the IMF, will increase slightly: next year from 9.5% to 11%, and the following year from 6.5% to 8.5%.
At the same time, the fiscal deficit will increase in 2024 from 15.7% of GDP to 19% of GDP, and in 2025 from 8.1% of GDP to 17.8%.
The IMF believes the impact of the war will have a significant affect on the country’s public debt in 2025, with the negative scenario worsening the assessment at the end of next year from 96.7% of GDP to 111.5% of GDP, and at the end of 2025 from 98.5% of GDP to 126.7% of GDP, compared to 87.1% of GDP at the end of this year.
However, the IMF only expect a decline in international reserves next year under the negative growth scenario — from $39.5 billion at the end of this year to $32.4 billion, but a year later they will again reach $39.8 billion, only slightly less than $41 billion under the base scenario.
The National Bank of Ukraine (NBU) in its latest forecast at the end of October 2023 estimated possible GDP growth in 2025 at 6% after a slowdown to 3.6% next year, assuming a reduction in inflation to 6% from 9.8%.
The NBU believes that next year the real wages will grow by 6.9%, and a year later by another 6.2% – with a decrease in unemployment respectively to 16.5% and 14.2%.
According to the Ministry of Economy, the growth rate in Nov. this year decreased compared to November last year to 4% [±2%].
GDP growth in October 2023 compared to
last year was about 10.5% (±2%). Overall, for Jan.-Oct., economic growth was
estimated at 5.5%.
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