Today, the Ukrainian economy is teetering on the edge of a crisis. The second half of 2024 and 2025 finally showed that there will be no quick recovery. Russian shelling of the energy industry and enterprises, destruction of infrastructure, chronic labor shortages and skilled labor torn from the economy by the war, business losses and Ukrainian savings on everything — all this keeps the economy on the brink of survival. An oppressive sense of uncertainty hangs in the air, and even the staunchest optimists have begun to admit: the road to recovery has turned out to be much more difficult and longer than it seemed at the beginning. If Ukraine does not find new drivers of growth in the near future, the scenario is already clear: years of painful stagnation and a return to the level of 2021 no earlier than 2030.
What happens to GDP
Compared to 2021, the Ukrainian economy still falls short by almost 22%. GDP growth of around 4% year-on-year looks paltry and clearly insufficient for a real recovery from the collapse caused by a full-scale invasion. A drop of almost 29% in 2022 was partially offset in 2023 by a growth of 5.3%, but already in 2024 the economy began to lose momentum. Each quarter of the year showed weaker indicators compared not only to pre-war 2021, but also to 2023, clearly signaling stagnation.
According to the Ministry of Economy of Ukraine, real GDP growth in 2024 was 3.6%. As the government notes, one of the factors that added momentum to economic growth in 2024 was the “Made in Ukraine” policy. Thanks to this, Ukrainian exports increased by 15.2% in annual terms, reaching $41.7 billion. This made it possible not only to prevent the economy from stagnating, but also to strengthen the position of Ukrainian goods on foreign markets.
At the same time, critically important enterprises played a key role in filling the budget. They, having the right to reserve their employees, provided 67% of all state revenues from business in 2024. This clearly shows who is holding the economic front of the country in the conditions of war. In addition, the result of privatization was no less impressive – revenues from it exceeded expectations by three times. After the closing of all agreements in 2024, the budget received up to UAH 12 billion, which became an important financial aid in the conditions of a shortage of resources. At the same time, in 2025, the Ministry of Economy is concentrating on attracting investments, expanding exports, maximizing the use of human capital, developing the reservation system, improving the business climate, and actively participating in European integration processes.
However, if you dig deeper, the current GDP indicator is an alarming signal: Ukraine’s economy is seriously slipping. The rate of growth is declining, and that means only one thing: we are entering a period of prolonged stagnation. Far from reality, the words about “rise” and “restoration” are broken by dry statistics. If in 2023 it was still possible to please ourselves with numbers — plus 5.3%, it would seem that we are moving forward. But that was an illusion created by the effect of a low base after a terrible failure. In 2024, such a “rebound effect” was no longer there, and the economy showed its true face – growth is weak, each quarter is inferior to the previous one, and we are still very far from the pre-war level.
Why does this happen? The reasons are on the surface. Of course, a war that does not end and does not retreat. Constant attacks on the energy infrastructure have already become systemic — the Russians are hitting TPPs, power grids, and everything that keeps Ukrainian production afloat. It doesn’t just hit the industry, it literally destroys it. Paralyzed production – minus exports, minus taxes, minus jobs.
The second problem is people, who have not just become fewer, but catastrophically few. Millions left, hundreds of thousands were mobilized, died or went missing. In addition, many men do not want to go to work, fearing TCC raids. As a result, enterprises cannot find workers, and without people, the economy does not work. This is a well-known and terrible fact. The chronic shortage of qualified personnel has already become the main brake for business.
And thirdly, the state has run out of simple incentives for growth. What in 2023 had a short-term effect has now become commonplace. Budget infusions no longer work as a driver, but simply patch holes. Add to this the constant need to finance the war — and we have a closed circle.
But inflation is an even greater threat to the economy. She came back, and came back hard. After relative stability in 2023, by the end of 2024, inflation soared to 12%. For a country at war, this is an almost uncontrollable situation. In addition, a dry summer, a bad harvest, rising energy prices, and a rapid increase in labor costs all led to the fact that the prices of basic products climbed up.
The National Bank does not stand aside either. At the end of the year, the regulator took a serious step — for the first time in two and a half years, it raised the discount rate to 13.5%. This is an attempt to curb inflation, stabilize the currency market and stop the price spiral. The task was ambitious — to return inflation to the target of 5%. But upping the ante is always a game on thin ice. Yes, deposits are becoming more attractive, people are taking money to banks. But at the same time, loans for businesses and consumers are becoming more expensive. New investments stop, businesses cut costs, people buy less. This is a direct blow to economic activity. In a situation where every penny counts, an increase in the cost of credit resources can finally finish off weak industries.
The National Bank is actually betting that the economy will slow itself down enough to stop prices. But the risk is obvious — together with inflation, economic life itself may disappear. Especially in wartime, when demand is already minimal. So, the forecasts are not encouraging. Even according to optimistic calculations, if the country can keep the GDP growth rate at the level of 3-4% per year (which is a big question), the return to the level of 2021 will not happen before 2030. Seven years of hard work… And this is provided that the war does not escalate, there are no new losses and upheavals.
Other economic indicators
Ukraine every time starts a new year with hopes of recovery and improvement, but the reality turned out to be much harsher. The state is faced with the reality in which it is necessary to fight, pay pensions, finance social welfare and repair the destroyed infrastructure. And all this at the same time, that is why decisions are made to raise taxes.
Tax revenues in 2024 increased by 37%, reaching 1,647 billion hryvnias. Income tax (+127 billion), excise duties (+106 billion) and VAT on imports (+100 billion) added the most. In real terms, revenues have returned to prewar levels for the first time, but this growth is not a sign of economic health, but a consequence of historic tax increases. The biggest blow fell on official businesses and employed citizens. The main emphasis was placed on the military collection, thereby further dividing the economy into “white” and “shadow”. Instead of a systematic approach to taxation, the entire bet was placed on legal taxpayers. Proposals to balance the load, for example, through an increase in VAT, were not even considered by the authorities.
In 2025, the revenues of the State Budget of Ukraine will show significant growth — compared to 2024, they will increase by 21.7% and amount to 2.3 trillion hryvnias. The main source of filling the budget is tax revenues, the share of which in the total structure of revenues has increased to a record 85.7%. For comparison, in previous years, taxes provided a much smaller part of state revenues. This growth was a direct consequence of the increase in a number of taxes, thanks to which the government expects to attract at least 153.8 billion hryvnias.
At the same time, the state expects to receive the largest increase in revenues due to an increase in the military levy — its revenues should increase by 122.4 billion hryvnias. An additional 4.3 billion hryvnias should come from an increase in the income tax. The budget also takes into account additional revenues in the amount of 22.6 billion hryvnias from the increase in excise duty on tobacco products and another 4.5 billion hryvnias from the increase in VAT. However, it is worth noting that draft law No. 11090, which provides for an increase in excise duty rates, has not yet been signed as of December 12, 2024, which creates certain risks for the implementation of these plans.
At the same time, even despite the overall increase in income, the country’s budget in 2025 will lack about 154.7 billion hryvnias due to the tax benefits provided. The biggest losses — 85.2% of this amount — will be due to VAT exemptions. At the same time, more than half of all tax benefits go to the defense industry, which is quite justified in the conditions of a full-scale war. However, such a large amount of losses due to benefits makes us think about the effectiveness of tax policy. That is why one of the real mechanisms for increasing state revenues could be a complete inventory of all tax benefits and incentives. This would make it possible to assess the expediency of each of them and to determine which are really needed in the conditions of war, and which are just “eating up” potential income in vain.
In addition to taxes, borrowing will remain an important source of financing state needs in 2025. In total, the government plans to attract 1.7 trillion hryvnias in external loans and another 579.2 billion hryvnias through internal state borrowing. Domestic resources will mainly be used to service and repay domestic government loan bonds (OVDP). It is noteworthy that 97% of these costs are covered by funds raised from new sales of OVDP bonds. Therefore, the structure of the budget for 2025 demonstrates the government’s strict fiscal policy, an attempt to mobilize tax resources as much as possible, and at the same time dependence on borrowing. This clearly reflects the state of the country in the conditions of a long war – the economy is supported by tax pressure, external financing and the search for a balance between defense and fiscal stability.
It should be noted that in 2025, the structure of tax revenues to the Consolidated Budget of Ukraine clearly demonstrated who is in charge of the country’s economy and fills the state coffers in wartime conditions. The largest amounts of taxes paid came from businesses in the field of trade — wholesale and retail trade, as well as motor vehicle and motorcycle repair provided 20.6% of all receipts. This once again confirms that the sphere of domestic consumption remains one of the main donors of the budget.
In second place is the processing industry with a share of 16%. Despite the difficulties of wartime and regular attacks on the energy infrastructure, it is industry that keeps a stable level of tax payments. The third position in terms of the amount of tax payments is public administration, defense and social insurance, which gave 12.9% of all revenues. It is worth noting separately the information and telecommunications industry – 5.4% of the contribution to the budget, which indicates the weight of the digital economy even in times of crisis.
However, the dynamics of tax revenue growth compared to January of last year is most impressive. Trade immediately added UAH 6.9 billion — an increase of 32.6%. Public administration and defense increased payments by 57.8% (+ UAH 6.4 billion), which is directly related to large-scale financing of the security and defense sector. The processing industry also showed a significant increase — by 31.4% or +5.2 billion hryvnias. And one of the most dynamic sectors — professional, scientific and technical activity — demonstrated growth by 54.6%, adding UAH 2.3 billion to the budget.
These numbers clearly demonstrate that despite all the challenges of the war, Ukrainian business continues to work, increase volumes and fill the budget. The position of the public sector and science-intensive industries has strengthened especially noticeably. This is a signal that even in the conditions of war, the country does not simply survive, but gradually adapts and strengthens certain sectors of the economy, which will become the foundation for post-war recovery.
At the same time, the total volume of expenditures in 2025 is planned at the level of 3.9 trillion hryvnias — this is 5% more than in 2024. And this increase clearly reflects the real challenges — the state continues to fight and tries to keep the social sphere from a complete collapse. In essence, the state budget of Ukraine, as the budget of a warring country, is clearly divided into two large parts: war and social support. The main priority is defense and security. More than 2.2 trillion hryvnias or 56.6% of all expenses are directed to this direction. That is, more than half of the budget goes to the front. In terms of GDP, this is 26.3% — no country in the world spends so much on war. At the same time, the security and defense sector will receive an additional 47.6 billion hryvnias compared to the previous year — these funds will go to weapons, equipment and payments to the military.
However, even these insane sums do not provide guarantees. The Ministry of Defense will receive 1.57 trillion hryvnias — an increase of only 2% compared to last year. And if the situation at the front worsens, this may turn out to be critically insufficient to maintain defense capability. This directly suggests that the budget will have to be optimized — to look for additional resources or to cut costs in other areas.
The second priority block is the social and humanitarian sphere. The state invests at least 22% of all expenses on it, which is equal to almost 10% of GDP. These are pensions, social benefits, salaries for teachers and doctors – what allows you to keep the country in good shape even during the war. Particular attention is paid to how Ukraine plans to cover these costs. In 2025, 59% of expenditures will be financed by budget revenues — taxes, fees, and other revenues. The remaining 41% is due to external and internal borrowing. And this is a positive signal. After all, even in 2024, the ratio was almost equal — 51% income and 49% debt. This means that the budget is beginning to level out, and dependence on loans is gradually decreasing.
In addition, international financial support for Ukraine will remain significant in 2025, but will gradually decrease as the economy stabilizes. According to forecasts, the country will receive $38.4 billion in external financing in 2025, which will decrease to $25 billion in 2026 and $15 billion in 2027.
But even so, in February 2025, the National Bank of Ukraine sold 3.058 billion dollars on the interbank foreign exchange market, which is 18% less compared to sales in January. According to the NBU, in general, since the beginning of the year, the amount of currency interventions of the National Bank has already reached 6.808 billion dollars. At the same time, the hryvnia is holding up as well as it can, but the state budget for 2025 sets the dollar exchange rate at the level of 45 hryvnias, which indicates the expected further growth of the American currency compared to the current level of about 42 hryvnias.
At the same time, as of February 28, 2025, the volume of official reserve assets of Ukraine reached 40.145 billion US dollars. Of this amount, monetary gold, including gold deposits and gold in swaps, was only $2.543 billion, or 6.34% of total reserves.
Agriculture once again became the main lifeline — 43% of the country’s commodity exports were agricultural products. In 2025, exports increased by 15% to $42 billion. Ukraine exported 61.5 million tons of grain and oil crops. Despite missile attacks and port problems, the Black Sea was operating at full capacity, providing 79% of all exports.
Metallurgy brought in $6.4 billion — 15.2% of exports. But this is a pale shadow of the pre-war indicators. Imports, on the other hand, grew by $71 billion, mainly technology, chemicals, pharmaceuticals, and energy sources.
Imports of services fell for the second year in a row — minus 10%. But more than 60% of this amount — $14.2 billion — went to travel and expenses of Ukrainians abroad. People spend more outside the country than it can earn inside.
The IT sector lost ground — a drop of 4.2%. At the same time, transport and professional services increased. Total exports of services showed a modest growth of 3.8% to $17.2 billion.
Trade geography is changing. Europe remains the main partner, but China is increasing its influence. In 2025, imports from China for the first time overtook the growth of imports from all EU countries combined.
However, there is a paradox in the labor market. If in 2024 its level was 14.2% (that is, about 2 million Ukrainians were looking for work), then in 2025 it will be 11.6%. However, this happens because work has appeared – people just run out. Mobilization, migration, lack of personnel — and business fights for every employee. At the same time, women get behind the wheel of trucks, elderly people and students occupy positions that were previously unavailable. Salaries are growing, but this does not save – there is no one to work physically.
It is unfortunate that against the background of all this, consumer sentiment has fallen to a three-year low. Ukrainians stopped believing in quick recovery. The only industry where there is still hope is construction. The state invested money in the restoration and this gave an impetus.
Thus, the conclusion is simple and at the same time disappointing – Ukraine has a broken, but still alive economy. We rely on partners’ money, exports and military bonds. The most difficult times are ahead, the country will face a long and tiring struggle not only at the front, but also in the economic field. And the main question now is not “will we grow?”, but “will we survive?”. The stakes are too high – either we will save the country, or everything will end in a budget pit, which is already visible to the naked eye.
