According to the quarterly report of the National Bank of Ukraine, the recovery of the Ukrainian economy will slow down to 3.6% this year. Inflation in the country will remain at a level similar to current indicators during the first months of 2024, but it is expected to increase moderately in the second half of the year, leading to a level of 8.6% by the end of the year.
Excessively favorable weather conditions affecting the food sector and increased business costs, in particular on labor costs, are identified as the main factors accelerating inflation. It is projected that after security risks decrease in 2025, inflation will slow down to 5.8%, and in 2026 it will return to the target of 5%. This will be facilitated by both the reduction of external inflationary pressure, in particular due to the decline in energy prices, and the consistent monetary policy of the National Bank of Ukraine.
Ukraine’s economic recovery will continue, albeit at a slower pace to 3.6% in 2024. To support this momentum, measures such as accommodative fiscal policy, further stimulation of domestic demand, and expansion of logistics capacity will be taken. Unfortunately, however, high security risks, large-scale losses, and destruction will limit economic growth. An additional constraint is the likely decline in harvests after last year’s record yields.
The forecast of the National Bank of Ukraine predicts an acceleration of economic growth rates to 5.8% in 2025 and 4.5% in 2026. It is important to note that actual consumer inflation in December 2023 was lower than forecast. Due to the rapid adaptation of foreign exchange market participants to the managed exchange rate flexibility regime, core inflation in 2023 generally slowed down to 4.9%.
