Ukraine's financial outlook for next year's war: Fitch Ratings forecast
Photo: Fitch Ratings gave a forecast on financing the budget of Ukraine (Getty Images)
The international agency Fitch Ratings forecasts Ukraine's need for external funding at $38 billion in 2025, compared to $41 billion in 2024, according to Fitch's statement.
"Near-term external financing uncertainty has eased, as the G7 will likely provide approximately USD50 billion in loans backed by returns from frozen Russian sovereign assets," the report states.
The agency forecasts that the state budget deficit will remain high at 19.1% and 19.2% in 2024 and 2025, respectively, despite the recently approved tax increases, due to significant defense-related spending needs and the anticipated reduction in foreign grants.
“Significant fiscal consolidation will be constrained by the continuation of the war, but also by reconstruction-related costs in the event of a durable ceasefire, likely maintaining the high reliance on foreign financing,” the agency’s analysts believe.
The agency also noted that the National Bank of Ukraine (NBU) has kept its key interest rate at 13% since June due to a stronger-than-expected inflation surge.
“Improved exchange rate flexibility, as a result of the October 2023 move to a managed float exchange regime and reduced uncertainty regarding near-term official financing have provided space for the NBU to ease FX restrictions,” the report states.
Recall that the NBU’s baseline macroeconomic forecast scenario anticipates continued substantial external financial support, particularly in 2025. The forecast includes attracting international funding of approximately $42 billion in 2024, $38 billion in 2025, and $25 billion in 2026.
The international agency Fitch Ratings expects the Russia-Ukraine war to continue into 2025. The agency forecasts a possible ceasefire but considers a peace agreement unlikely.
