EU Commission downgrades forecast for Ukraine's economy for 2025
Photo: The European Commission has given a forecast for Ukraine (Getty Images)
The European Commission has improved its forecast for Ukraine's economic growth in 2024 from 2.9% to 3.5%. However, the forecast for 2025 has been downgraded from 5.3% to 2.8%, and rapid growth will begin only in 2026.
As noted in the forecast, despite the ongoing and intensifying attacks on critical infrastructure, Ukraine's economy has so far remained remarkably resilient. Supported by export potential, high defense spending, and household demand, growth is expected to reach 3.5% in 2024 before slowing to 2.8% in 2025.
Photo: European Economic Forecast. Autumn 2024
“In view of the intensified hostilities, reconstruction is now projected to gain momentum in 2026 only,” the European Commission adds.
Inflation is projected to rise to 9.2% in 2025 due to a sharp rise in energy prices and wage growth but should ease in 2026 as supply-side pressures ease.
According to the European Commission, Ukraine's real GDP grew by 5.0% yoy in the first half of 2024,
“Consequently, while real GDP growth is expected to slow compared to 2023, it is forecast to remain relatively strong at 3.5% in 2024.”
Reconstruction postponed
Going forward, the forecast is based on the assumption that the conditions for a gradual increase in early reconstruction efforts will be created later than previously assumed, starting in early 2026.
As a result, real GDP growth is projected to decelerate further in 2025, as resource constraints, including labor shortages, export capacity constraints, and energy shortages, put increasing pressure on economic activity.
Overall, real GDP growth is expected to slow to 2.8% in 2025 before reaching 5.9% in 2026 once conditions are in place for a gradual increase in reconstruction efforts and confidence improves.
According to the European Commission, the forecast is subject to extremely high uncertainty, and the risks are largely skewed downward. A further escalation of the conflict could lead to higher resource costs, additional loss of production capacity, and a further increase in the number of displaced people.
Ukrainian economy forecasts
In October, the International Monetary Fund downgraded its forecast for Ukraine's economic growth in 2024 due to the effects of Russian strikes on energy infrastructure from 3.2% to 3.0%.
In July, the Ukrainian government significantly downgraded its forecast for Ukraine's economic growth in 2025 to 2.7%. Previously, growth of 6.8% was expected.
In October, the National Bank of Ukraine improved its forecast for Ukraine's real gross domestic product (GDP) growth in 2024 from 3.7% to 4.0%.
