EBRD forecasts growth of Ukraine's economy in 2025.

The European Bank for Reconstruction and Development predicts that the Ukrainian economy will grow at a rate of 3.5% in 2025.

This information is contained in the EBRD report titled 'Regional Economic Prospects'.

The new EBRD forecast for Ukraine in 2025 is 1.2 percentage points lower than in the previous REP report published in September last year (4.7%).

It is noted that Ukraine has stable external financing; however, economic growth is slowing due to the impacts of war, and inflation is accelerating.

'The continuation of the war and Russia's shelling of our energy infrastructure have led to a shortage of electricity and the need to import it at high prices. In addition, we also faced a labor shortage in the labor market. GDP growth noticeably slowed down in 2024 - from over 5% in the first half to about 2% in the second half. The overall GDP growth rate for 2024 is estimated at around 3%,' the report states.

EBRD analysts explained the increase in inflation in the second half of 2024 by the rise in electricity prices, changes in tariffs in regulated sectors, an increase in real wages, and the weakening of the hryvnia against the US dollar.

It is estimated that annual inflation in December 2024 reached 12% and is likely to remain at a similar level in the first half of 2025, but will gradually decrease to below 10% by the end of the year.

Despite two increases in the National Bank of Ukraine's key interest rate (from 13% to 14.5%) in December 2024, there is a likelihood of further tightening of monetary policy.

In 2025, a budget deficit of 19.4% of GDP is projected for Ukraine, which will be fully covered by external financial assistance amounting to $38.4 billion. This amount includes $13.7 billion from the EU (Ukraine Facility), $22 billion from G7 countries (frozen Russian assets), and $2.7 billion from the IMF.

The EBRD anticipates that the factors negatively affecting growth in the second half of 2024 will persist into 2025.