In his new article, economist Bohdan Danylyshyn summarized the latest trends in the Ukrainian economy. As of mid-2024, economic indicators show some improvement alongside numerous challenges, including high security risks and energy infrastructure issues.
Business activity and inflation expectations
According to data from the National Bank of Ukraine, the index of business expectations of enterprises (IBO) decreased to 99.5% compared to 103% in the first quarter of 2024. This indicates a decrease in the optimism of entrepreneurs regarding future business activity. At the same time, inflationary expectations and forecasts regarding investment attraction are improving. Many entrepreneurs expect an increase in the volume of product sales and investment costs in equipment, albeit at a less active pace.
June 2024 brought new challenges in the form of widespread blackouts that negatively affected economic activity. The Ministry of Economy notes that this limited both enterprises and consumers, holding back overall economic development. Despite this, GDP growth remained almost at the level of the previous month — 1.1%.
State of the labor market and wages
According to the data of the Ministry of Economy, the average nominal salary for vacancies in June 2024 increased by 21.8% and reached UAH 19,244. At the same time, the average salary per resume increased by 16.8% to UAH 20,147. This indicates positive trends in the labor market, although the high level of security risks and the shortage of qualified personnel continue to create difficulties.
Financial sector and budget
The financial sector continues to adapt to new conditions. The NBU discount rate has been reduced to 13% since June 14, but the real gap between it and inflation remains significant. Despite the decrease in deposit and loan rates, the cost of loans to the corporate sector has increased, indicating an increase in business financing costs.
The budget deficit is $16.7 billion, which is 50% of the total revenue. From the beginning of the year to July 9, UAH 273.3 billion was raised to cover the deficit, and the total amount of international financial assistance to the state budget until July 3, 2024 amounted to about $91.1 billion.
Energy sector and inflation
The annual inflation rate rose to 4.8% in June, a significant increase from 3.3% in May. The main cause of inflation was the increase in electricity tariffs due to the destruction of the energy infrastructure. This caused business and consumer costs to rise, which was reflected in the overall price level.
Exchange rate and currency expectations
Since the beginning of the year, the hryvnia has devalued against the US dollar by 7.6%. The NBU continues to control the exchange rate, but the reserve deficit grew to $14.8 billion by July 5. This indicates the difficulties in managing the foreign exchange market and the impact on the currency expectations of Ukrainians.
