European Commission published an economic growth report for the 27 EU countries, as well as candidate countries, who want to join the block. According to the report, Ukraine’s economic growth is expected to recover this year and next year, following the decline caused by the Russian invasion in February 2022. At the same time, inflation will slow down, however, even by 2025, the country’s economy is forecasted to remain at approximately 20% below the pre-war level. Ukraine’s economic outlook largely depends on the course of the Russian-Ukrainian war, the inflows of foreign funds and the evolution of exports.
According to the European Commission report, Ukraine’s economy has shown “remarkable resilience throughout 2023” despite continued disruptions in critical infrastructure and supply chains. The real GDP in the first quarter of 2023, compared to the fourth quarter of the previous year, increased by 2,4%.
In the short run, private consumption will likely be the key growth factor as consumers continue to adjust to the war conditions, and a decrease in inflation provides some support to real incomes. Private investment is expected to remain moderate amid war-related uncertainty. Russian attacks on transport infrastructure and disruption of the grain export deal have certainly had an impact on Ukraine’s exports. Nevertheless, since Ukraine has started using alternative export routes, exports are expected to gradually increase.
The report estimates that Ukraine’s gross domestic product (GDP) will grow by 4,8% in 2023, after a dramatic 29,1% decline in 2022. These projections are a positive revision compared to the Commission’s earlier spring report. Additionally, it is estimated that in 2024, Ukraine’s GDP will increase by 3,7% and then will grow by another 6,1% in 2025 – under the assumption, however, that there will be measures in place for reconstruction efforts to begin in early 2025.
European Commission also predicts that investments (gross fixed capital formation) will increase by 17% this year after an understandable decline of 34,3% in 2022. In 2024, investments are projected to grow by another 12%, and in 2025, by 28%. Inflation, which was reported at 26,6% in December last year, fell to 7.1% in September this year. Annual inflation is projected to decrease to 7,6% in 2025, the European Commission asserts.
A month ago, in October 2023, Ukraine’s Ministry of Economy estimated Ukraine’s GDP growth at “at least 5% next year” and reported that Ukraine’s GDP growth in September 2023 was 9,1% compared to September of the previous year, while the January-September 2023 growth was reported at 5,3%.
