The Cabinet of Ministers forecasts a slowdown in the economy, accelerated export dynamics, and a weakening of the hryvnia in 2025. This is outlined in the macroeconomic forecast accompanying the government's draft state budget for 2025.
Here are some key points:
- The government expects real GDP growth to slow from 3.5% in 2024 to 2.7% in 2025.
- The nominal GDP for next year is projected to be nearly 8.5 trillion UAH, which corresponds to a 13.1% increase. Thus, the GDP deflator (a measure of overall inflation) is expected to be 10.1% next year.
- Government analysts anticipate an acceleration in the Consumer Price Index (CPI) from 7.9% at the end of 2024 to 9.5% by the end of 2025.
- According to the Ministry of Economy's forecast, the average exchange rate of the dollar is expected to be 40.8 UAH by the end of 2024, and 45 UAH per dollar in 2025.
- In 2025, the average wage of employed workers is expected to increase by 18.5% in hryvnia terms. However, after adjusting for the government’s exchange rate forecast, the dollar-denominated wage growth is expected to be only 7.4%.
- The government forecasts a 7% increase in exports of goods and services in 2025, up from 4.7% in 2024. Conversely, imports are expected to grow at a slower rate of 3.7% in 2025, compared to 6.3% in 2024.
The draft budget includes revenues of 2 trillion UAH and expenditures of 3.6 trillion UAH. Over 60% (2.2 trillion UAH) of expenditures are planned for defense. Within the defense budget, the government plans to increase funding for weapons and special equipment procurement to 737 billion UAH, with 54.6 billion UAH allocated through the Ministry of Strategic Industries and 46.9 billion UAH through the State Service of Special Communications and Information Protection.
More than 400 billion UAH is allocated for social protection. “Pensions will be indexed, and subsidies will be provided to all who need them,” said Prime Minister Denys Shmyhal. 211 billion UAH will be directed to healthcare and nearly 170 billion UAH to education.
Funds are also planned for preferential lending programmes and grants for entrepreneurs, as well as for the humanitarian demining programme and the eOselya programme. Shmyhal did not specify the exact amount allocated for these areas.
The state budget deficit for 2025 is projected at 1.64 trillion UAH, or 19.4% of GDP. To cover this deficit, the government expects to receive external funding amounting to $38.4 billion.
On the domestic market, the government plans to raise 579 billion UAH in borrowings, slightly more than the planned 562 billion UAH in repayments of government bonds for the next year.
Privatization of state assets in 2025 is expected to yield only 3.2 billion UAH. In comparison, revenues were 3.15 billion UAH in 2023, and 1.45 billion UAH for the first seven months of 2024.
The reserve fund for 2025 is planned to be 43.9 billion UAH, and the state road fund will have a similar allocation of 43.2 billion UAH.
Funding for the Entrepreneurship Development Fund (5-7-9 programme) for 2025 is set at 18 billion UAH.
It is anticipated that the government may issue state guarantees for loans up to 30 billion UAH in 2025.
The draft budget now awaits consideration by the Verkhovna Rada. According to the Budget Code, the timeline for approval is as follows:
- Submission of the document to the Rada — September 15;
- First reading — by October 20;
- Second reading — by November 20;
- Third reading (if needed) — by November 25.
