The end of the year is always a time to take stock and make predictions for the future. Despite regular missile attacks and the economic challenges of the third year of full-scale war, Ukraine is showing some progress in its recovery. The country’s economy, which in 2022 experienced an unprecedented contraction of 29.2%, began to gradually recover in 2024. The first signs of GDP growth have become evidence of adaptation to difficult conditions, and cautious forecasts are already emerging about the possibility of maintaining this trend in 2025. Despite all the difficulties, the state’s efforts, international aid and initiatives to restore infrastructure create prerequisites for economic stabilization and development in the future. Although the high level of uncertainty of conditions calls into question any forecasts regarding the dynamics of the Ukrainian economy.
What allowed the Ukrainian economy to avoid collapse?
In 2024, the Ukrainian economy showed certain signs of improvement. Modest growth was made possible thanks to international financial assistance, partial stabilization of agricultural exports, and measures to restore infrastructure destroyed by military actions. At the same time, the recovery remains uneven, and the economy continues to depend on external support.
Domestic consumption plays an important role in sustaining economic activity, but the population’s income level and purchasing power have declined significantly compared to the pre-war period. Business adaptation to new conditions also has its limitations due to losses in markets, logistical difficulties and high investment risks.
Government initiatives and anti-crisis measures, despite their importance, are not always sufficiently systematic. Economic policy remains focused on short-term stabilization, while issues of long-term development and structural reforms are postponed due to the need to quickly solve urgent problems.
The current GDP growth, although positive, is based on a weak foundation and further efforts are needed to ensure the sustainability of the economy in the context of a protracted war and a difficult global environment.
Critical dependence on external financial assistance
From the beginning of the full-scale invasion, all the income that Ukraine receives to the state budget, are directed to the financing of defense needs. Defense expenditures make up about half of the country’s budget. Instead, all civilian costs are covered by international financial aid, which in 2024 reached $40.7 billion.
During 11 months of 2024, foreign financial aid covered 68% of the additional needs of the state budget. Although these funds were not enough to fully meet the country’s financial needs, it actually corresponded to the forecasts. The rest of the deficit was compensated by domestic state loan bonds, which became the main source of covering the shortfall.
Infographic: AI “FACT” Infographic: IA “FACT”
As can be seen from the infographic, the largest share of total financial assistance to Ukraine in 2024 is provided by the European Union, the amount of which is $17.3 billion. The main part of this support is provided in the form of loans, which shows the strategic interest of the EU in the long-term financial stability of Ukraine. At the same time, this form of aid increases the country’s future debt burden.
Domestic state loan bonds, the volume of which reached $15.7 billion, remain a significant source of financing. On the one hand, this reflects the confidence of foreign and domestic investors in the Ukrainian economy. On the other hand, such obligations also add financial pressure due to the need to repay them in the future.
Grant support, which does not create a debt burden, remains especially important. The United States is the largest source of grant funds ($7.8 billion), which are directed to priority needs, including infrastructure restoration and funding of social programs.
Significant contributions in the form of soft loans are made by the IMF ($5.3 billion), Japan ($4 billion) and the World Bank ($3.2 billion). Their support is aimed at ensuring macro-financial stability and implementing projects to restore key infrastructure facilities.
Although the amounts of aid from countries such as Norway ($0.3 billion) and South Korea ($0.1 billion) seem small in the general context, they are an important symbol of international solidarity and broad support for Ukraine.
Stabilization of agricultural exports
After the start of the full-scale Russian invasion of Ukraine, agricultural exports suffered significant difficulties due to the blockade of ports on the Black Sea. However, thanks to the “grain agreement” and the creation of alternative routes, such as through Romanian ports and railway corridors, it was possible to stabilize the supply of grain, oil and other agricultural goods. In particular, through Romania and Poland, Ukraine resumed significant volumes of grain exports.
Many were probably surprised by the recent statement of President Zelensky, who promised to provide Syria with humanitarian aid, including agricultural products. Do we have a surplus of products? Minister of Agrarian Policy and Food Vitaly Koval explained, that Ukraine has the opportunity to export flour, sugar, oil, grocery sets, as the export of Ukrainian products has now resumed. “I will say that Ukraine takes such a position that where it is difficult, we should be,” the minister said. – And it is important that we are the guarantor of food security in the whole world, that is why our farmers, our agrarians grow products so that they are delivered to those regions that need it the most.” And we actually use traditional delivery routes. The majority of agricultural products, namely 86%, is exported through the ports of Greater Odessa and the Danube ports, which reduces the burden on land borders with European countries.
In particular, 55% of Ukrainian agricultural products go to the European Union market, which is important for us. We emphasize once again that Ukraine is ready to fulfill all obligations to observe discipline in supplies and support stable trade with European partners, — noted Minister of Agrarian Policy and Food Vitaly Koval.
Infrastructure projects
The restoration of infrastructure has become an important trend for improving the economy of Ukraine in 2024.
According to statistics, the largest number of projects is implemented in the Kyiv region, which is due to its strategic importance and great damage during hostilities. Kharkiv, Dnipropetrovsk, and Mykolaiv regions also have a significant number of projects, which reflects their important economic and social importance, as well as the scale of destruction. Other regions, in particular Western Ukraine, have a much smaller number of projects, which is a consequence of the lesser impact of the war.
The European Investment Bank provided EUR 55 million for the reconstruction of 151 social infrastructure facilities, including hospitals, housing and heating, water supply and drainage systems. In 2025, further funding is planned for the modernization of energy networks, roads and transport, which will contribute to improving logistics and reducing energy costs. Rebuilding infrastructure creates new jobs, supports economic activity, and provides sustainability for the future, contributing to overall economic growth.
Infographic: IA “FACT”
Forecasts for the next year are getting worse
Forecasts for the growth of Ukraine’s economy in 2025 vary considerably, which is a result of the complex and unpredictable conditions of the ongoing war. It is extremely difficult to determine the exact development trends of such key sectors of the economy as energy, industry, agriculture and the labor market in the short term. Forecasts of economic growth are changing, as the situation at the front and in the country as a whole remains unstable.
At the beginning of 2024, the World Bank predicted that Ukraine’s GDP would increase by 6.5% in 2025. However, already in October of this year, the SB adjusted its forecast, reducing the expected growth to 2%. At the same time, the growth of the economy was postponed to 2026, with a growth forecast at the level of 7%.
The European Bank for Reconstruction and Development was also forced to revise its expectations regarding economic growth in Ukraine. In the summer of 2024, the EBRD projected growth at 6%, but this forecast was adjusted to 4.7% by autumn. The main reason for this was the destruction of the electricity generation infrastructure and power transmission facilities, which occurred as a result of enemy shelling and had a serious impact on economic activity.
Given these circumstances, the government of Ukraine in its budget for 2025 predicted even more cautious growth figures. It is about 2.7%. Such restraint is explained by the need to take into account possible negative scenarios: continuation of hostilities, increase in defense costs, high level of inflation, reduction of international financial support and decrease in demand for exports. Despite modest forecasts, many economic experts and analysts express rather optimistic expectations. For example, the National Bank of Ukraine noted in its latest report that the economy of Ukraine may show growth at the level of 4.3% in 2025, exceeding even the indicators of 2024.
At the same time, it should be noted that given the variability of the situation, forecasts may be adjusted. Already in January 2025, the publication of updated economic forecasts is expected, which may reveal both improvement and downward dynamics, depending on the actual circumstances and new external and internal challenges that Ukraine will face next year.
