Ukraine's economy remains resilient, but GDP growth will slow due to the war and inflation. Inflation reached 12.9%, which led to an increase in the NBU's key interest rate.
This was reported by a press release from the IMF.
"The economy has remained resilient despite the immense challenges. Recent activity indicators have been stronger than expected, resulting in an upgrade of the 2024 growth forecast, though a moderation is expected next year due to strains from labor and energy shortages. Inflation is slightly above expectations, and vigilance is warranted should pressures persist. Based on available information, the medium-term outlook is little changed compared to the Fifth Review. Risks remain exceptionally high particularly arising from uncertainty about the outlook for the war, including how it ends. Repeated attacks on energy infrastructure also remain a high risk; while the authorities’ preparedness is a strong mitigant, sustained infrastructure damage could take a further humanitarian and economic toll. Finally, reform fatigue is a risk at a time when the momentum is needed on a wide-ranging set of transformative reforms," the report reads
Real GDP growth for 2024 is projected at 3.5%, but in 2025, it may slow to 2-3% due to labor shortages, damage to energy infrastructure, and ongoing hostilities.
Inflation continues to rise, reaching 12.9% year-over-year in January, primarily driven by increases in food prices and wages. In response, the National Bank of Ukraine raised the key interest rate by 150 basis points in December.
Ukraine's international reserves reached 43 billion USD as of January 2025, thanks to significant external financial support.
Risks to the economy remain extremely high due to uncertainty regarding the war, prospects for peace, and the country's further recovery.
"The financial sector remains stable, but vigilance is needed given heightened risks. Progress on strengthening bank resolution and risk-based supervision, stress-testing frameworks and contingency planning should be sustained. Reform momentum in anticorruption and governance needs to be sustained. In particular, the authorities need to advance the creation of a new court for high public disputes, and amend the criminal procedure code," said Ms. Kristalina Georgieva, Managing Director of the IMF.
