EBRD downgrades Ukraine's economic growth forecast

Growth forecasts for 2025 for Ukraine have been revised downward due to weaker external demand from the EU. At the same time, Russia's attacks on energy infrastructure continue to put pressure on economic activity, according to the updated forecast of the European Bank for Reconstruction and Development.

Stable external financing from the EU under the Ukraine program and proceeds from frozen Russian assets provided by the G7 countries will fully cover Ukraine's deficit in 2025, maintaining macroeconomic stability.

Strong government consumption and increased military procurement from domestic industry are expected to support economic growth.

However, the document says recent global trade frictions have added additional downside risks to the already high uncertainty associated with Russia's ongoing war of aggression.

Therefore, the forecast for real GDP growth was revised to 3.3% from 3.5% in 2025. At the same time, the forecast of real GDP growth for 2026 remained unchanged at 5%, assuming “the cessation of hostilities and the benefits of post-war recovery.”

Situation in 2024

According to the EBRD, Ukraine's real GDP growth declined from 5.3% in 2023 to 2.9% in 2024 due to electricity shortages, poor harvests, and a severe labor shortage in the economy.

While agriculture, energy production, and trade declined, other sectors showed steady growth despite the challenging environment and the ongoing Russian war of aggression.

Businesses demonstrated resilience and adaptability, which, combined with a well-functioning Black Sea trade corridor, led to a resumption of export growth after two years of sharp decline.

External financing remained at the same level as in 2023, fully covering the current account deficit and allowing Ukraine to maintain sufficient official foreign exchange reserves.

According to the EBRD, the increase in inflation in the second half of 2024 was the result of higher electricity prices, high real wage growth, and a depreciation of the exchange rate against the US dollar by about 10% since the peg was removed in October 2023.

The document says inflation stood at 14.6% in March 2025 and is expected to remain high in the first half of 2025, but should decline to single digits by the end of the year.

Forecasts

According to the State Statistics Service, Ukraine's GDP growth slowed to 2.9% in 2024. The GDP growth forecast included in the 2025 budget is 2.7% per year.

In April, the National Bank of Ukraine (NBU) downgraded its forecast for Ukraine's real gross domestic product (GDP) in 2025 to 3.1%.

In April, the IMF downgraded its forecast for Ukraine's economic growth in 2025 to 2.0%, down from 2.5% in its October forecast.