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. During the first months of 2024, inflation in the country will remain at a level similar to current indicators, but it is expected to increase moderately in the second half of the year, which will lead to reaching the level of 8.6% by the end of the year.
Excessively favorable weather conditions affecting the food sector and an increase in business costs, in particular for labor costs, have been identified as the main factors in the acceleration of inflation. As security risks recede, inflation is projected to slow to 5.8% in 2025 and return to the 5% target in 2026. This will be facilitated both by the reduction of external inflationary pressure, in particular due to the cheaper energy sources, and by the consistent monetary policy of the National Bank of Ukraine.
The process of recovery of the Ukrainian economy will continue, although it will slow down to 3.6% in 2024. To support this movement, measures such as soft fiscal policy, further stimulation of domestic demand and expansion of logistics capacity will be taken. Unfortunately, however, high security risks, large-scale loss and destruction will limit economic growth. An additional restraining factor is the probable reduction of harvests after last year's crop yield records.
The forecast of the National Bank of Ukraine foresees an acceleration of economic growth 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 regime of managed exchange rate flexibility, core inflation slowed down to 4.9% in 2023.
