The European Bank for Reconstruction and Development (EBRD) forecasts that Ukraine's economy will grow by 3.0% in 2024. This figure is lower than the 5.3% GDP growth in 2023.
According to the EBRD forecast, Ukraine's economic growth in 2023 was supported not only by record harvests but also by increased defense spending, which boosted domestic demand, while net exports continued to decline. Other supporting factors included the Ukrainian government's success in restoring electricity supply after Russian attacks on civilian infrastructure the previous winter, as well as the resilience and adaptability of Ukrainian businesses.
The timely external financing in 2023 was another stabilizing factor, helping to reduce inflation to the target level of about 5%. This included the International Monetary Fund's Extended Fund Facility (EFF) program of $15.6 billion. Ukraine received $42.5 billion from donors and international organizations, including grants totaling $12 billion. This raised official foreign reserves to a record level as government debt rose to almost 90% of GDP.
"However, in 2024, the prospect of a protracted war of attrition and lingering doubts about external financing this year, which persisted for several months before being resolved, have created new challenges. Limited domestic demand, labor shortages, and inadequate investment are also among the factors likely to constrain growth prospects," the publication states.
A positive development is the opening of a new Ukrainian export corridor along the Black Sea coastline, which has removed some uncertainty about wartime security for using the Black Sea for exporting agricultural products and other goods such as metals and ores, according to the EBRD.
After a slow start, the use of this corridor began to increase, stimulating not only agriculture but also the metallurgical and mining industries, which have been among the hardest hit sectors in the last two years.
"The revival of exports and the increase in domestic military production are likely to provide economic growth of 3% in 2024, accelerating to 6% in 2025. However, risks remain high, particularly related to the destruction of port and power infrastructure," the forecast states.
