Ukraine is currently actively discussing the State Budget for 2025, which seems to reflect several of the government’s strategic expectations for the coming year. As economists note, the budget not only determines the key areas of financing, but also shows economic forecasts for the future, including the development of events at the front.
Financial analyst, economic expert of the “United Ukraine” Analytical Center Oleksiy Kush assumes that some provisions of the budget may indicate the probable partial demobilization of the military and even the possibility of a certain “freezing” of the conflict.
Kush explains that one of the most visible signs of such intentions is an increase in additional subsidies from the central budget to local budgets, which compensates for the decrease in income from personal income tax (PIT) in 2025. It is expected that these revenues will decrease by 20 billion hryvnias, and this, according to the expert, may indicate the government’s plans to partially demobilize the military, because they are important taxpayers of personal income tax.
The return of part of the military to civilian life would lead to a decrease in the income of this tax, which is what the draft budget provides for. According to Kush, such budget forecasts may mean a gradual transition to a “freeze” of the war, when active hostilities are reduced and the number of military personnel in service is reduced.
In addition, the project envisages a significant increase in the financial resources of local budgets, which should support the regions most affected by the war. In particular, an additional billion hryvnias is planned for emergency and recovery works in Kharkiv. Such spending on infrastructure restoration indicates that the government is paying considerable attention to the reconstruction of affected regions and providing local budgets with the resources necessary for reconstruction.
The State Budget draft also indicates a slowdown in economic growth in 2025. According to preliminary data, the GDP growth rate may decrease from 3.5% in 2024 to 2.7% in 2025. According to Kush, this reduction in expectations for the rate of economic growth may indicate the government’s plans to extend the war for another year. At the same time, the recovery of the economy is postponed, and all hopes for dynamic growth may be transferred to the next period.
The expert explains that the forecasts included in the budget may reflect a vision of the economy in a state of a kind of “purgatory” — a situation when the country is between the active phase of the war and full recovery. In such conditions, the economy does not have the opportunity to fully recover, but it also does not face large-scale new challenges. This assumes that major resources are still devoted to defense and sustaining the viability of infrastructure, and the resumption of economic growth is delayed until after hostilities have ended.
At the same time, the project envisages an increase in spending on critical infrastructure, including infrastructure for civil aviation. This may indicate the government’s plans to resume air travel next year, which is an important step towards the restoration of a full-fledged life in the country and the development of the economy.
Summarizing his conclusions, Kush notes that the expectations and forecasts included in the budget may indicate the government’s long-term strategy, which takes into account the possible slowdown of hostilities and the transition to the “frozen” phase of the conflict.
