The European Bank for Reconstruction and Development (EBRD) has revised Ukraine’s economic growth forecast for 2025 downward from 4.7% to 3.5%.
Previously, the bank forecasted Ukraine’s GDP at 4.7%. The downgrade is driven by high inflation, labor shortages, and challenges in the energy sector.
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The EBRD predicts possible GDP growth acceleration to 5% in 2026, according to its press release.
In 2024, Ukraine’s economy grew by 3%. Economic growth exceeded 5% in the first half of the year but slowed to 2% in the second half due to the ongoing war, particularly Russia’s air raids on Ukraine’s energy infrastructure, the EBRD reported.
Ukraine also faces pressure from high electricity import costs and a labor force shortage.
Annual inflation reached 12.9% in January 2025 and is expected to remain high during the first half of 2025 before declining later in the year. The National Bank of Ukraine (NBU) raised its key interest rate from 13% to 14.5% in an effort to curb inflation. Between 2022 and 2024, Ukrainian enterprises had to deal with electricity deficits, hurdles in talent acquisition and higher costs for raw materials – all a direct result of Russia’s war in Ukraine. After electricity prices for Ukraine’s business increased by 60%, the war-torn economy experienced additional pressure on prices, caused by a drought in 2024.
The drought caused a chain reaction of price increases in raw food products, processed food products, and the cost of meals Ukrainians eat outside their homes. Prices of raw food products also contributed to the rising costs of livestock feed, increasing prices of livestock products.
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The NBU expected that the drought would cause additional price pressure, but underestimated the extent of its impact on prices. “These factors turned out to be stronger than we had expected,” NBU Deputy Governor Sergiy Nikolaychuk previously told Kyiv Post in an exclusive interview
How Ukraine’s economy endures the war
In 2025, Ukraine’s expected external financing of $38.4 billion may cover its budgetary needs. This includes $8.4 billion from the EU and a $22 billion loan from G7 nations backed by frozen Russian assets.
In January 2024, Ukraine received a first tranche of €3 billion ($3.09 billion) from the EU in the form of a loan financed by the proceeds of $210 billion of frozen sovereign Russian assets, Kyiv Post reported.
Ukraine also expected to receive 2.7 billion in 2025 from the International Monetary Fund (IMF). On Feb. 20, the IMF began its seventh review of the Extended Fund Facility (EFF) program, which, if approved, will provide Ukraine with a $917.54 million tranche, Kyiv Post previously wrote.
The EBRD also highlighted several positive factors for Ukraine’s economy. These include the resilience of businesses adapting to wartime conditions and the stable operation of the Black Sea trade corridor, which allows Ukraine to export goods after terminating its grain deal with Russia in July 2023.
After the deal with Russia collapsed, Ukraine established its own alternative routes for exporting grain via the Danube River, railways, and a newly established Black Sea trade corridor protected by its military.
Additionally, Ukraine is increasing government spending and purchases from domestic industries, stimulating economic growth, the EBRD reported.
Global economic uncertainty
The EBRD has lowered its overall growth forecast for the 36 economies it invests in, now expecting 3.2% growth in 2025 and 3.4% in 2026.
The key factors behind this downgrade include weaker external demand in Central Europe, the Baltics, and southeastern parts of the EU, as well as the impact of conflicts and slow reforms in the southern and eastern mediterranean (SEMED) region.
Potential new US import tariffs under US President Donald Trump and counter measures from trade partners also pose additional risks to global economic growth.
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