World Bank cuts Ukraine’s 2025 GDP forecast to 2% as war rages on
The World Bank has downgraded its 2025 GDP growth forecast
for Ukraine to 2% from 6.5% in its June report but raised the 2026 forecast to
7% from 5.1%, according to its Global
Economic Prospects report published on Jan. 17, 2025.
“Growth in Ukraine is projected to slow to 2% in 2025,
assuming active hostilities persist throughout the year. In 2026, with an
anticipated cessation of fighting, a strong recovery of 7% is expected, driven
by consumption and reconstruction investments,” the report stated.
The forecast remains contingent on the timeline and scale of
external aid and the duration of Russia’s invasion.
Economic challenges and resilience
The bank estimated Ukraine’s growth slowed to 3.2% in 2024,
hindered by reduced energy capacity and winter power outages that suppressed
trade and industrial production.
“Despite these obstacles and continued infrastructure
attacks, the economy demonstrates significant resilience,” the report noted.
It also highlighted Ukraine’s September 2024 restructuring
of $20 billion in Eurobond debt, reducing amortization and interest payments by
$7.6 billion between 2025 and 2027 compared to pre-restructuring obligations.
Ukraine’s EU accession talks and the “Ukraine Plan” under
the EU’s Ukraine Facility for 2024–2027 were cited as key anchors for alignment
with the EU.
Regional outlook
The World Bank predicts regional growth in Europe and
Central Asia will slow to 2.5% in 2025, mainly due to reduced growth in Russia
and Türkiye, before increasing to 2.7% in 2026.
“Downward revisions in regional growth for 2025, by 0.4
percentage points compared to June projections, reflect weaker forecasts for
Türkiye due to delayed effects of tighter monetary policy and for Ukraine due
to the ongoing invasion,” the report added.
“Geopolitical tensions remain a serious risk. The invasion
of Ukraine continues to shape regional prospects. Any further escalation could
lead to greater economic shocks across the region,” the World Bank warned.
Defense spending and inflation
The war has directly affected 41% of Ukraine’s population,
underscoring significant human and economic costs. Defense spending surged
across the region in 2023, averaging 4% of GDP—double the 2010–2021 average—and
accounting for nearly one-third of Ukraine’s GDP.
In Russia, growth is projected to slow from 3.4% in 2024 to
1.6% in 2025 and 1.1% in 2026, with private consumption and investment growth
expected to decelerate due to slower wage growth and tighter monetary policy.
The International Monetary Fund (IMF) also released updated
forecasts, maintaining Russia’s 2025 growth estimate at 1.2% while revising its
2024 estimate upward to 1.4%.
Earlier reports from Ukraine’s First Deputy Prime Minister
Yuliia Svyrydenko indicated an expected GDP growth of 4% in 2024. Inflation in
2024 was estimated at 12%, with a National Bank of Ukraine forecast of 9.7% for
2024 and 6.9% for 2025.
The Economy Ministry projected 2024 GDP growth at 3.9% with 9.5% inflation, while the 2025 state budget is based on a 2.7% GDP growth forecast with 9.5% inflation.
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