“Currently, the main problems of Kyiv are the lack of electricity, people and money.”, — write: www.unian.ua
Currently, the main problems of Kyiv are the lack of electricity, people and money.
The economy is currently stronger than the Russian one / photo ua.depositphotos.comUkraine’s economy in general was rebuilt on the realities of wartime. It is still a quarter smaller than in 2021, but for the first time since 2022, it is healthier than the Russian one in some key parameters.The Economist writes that the NBU predicts GDP growth of 4% in 2024 and 4.3% in 2025. The currency is stable, and the interest rate of 13.5% remains at its lowest level in the last 30 months. Compared to Russia, where the rate could reach 23% to stop the fall of the ruble, the banks look fragile and GDP will grow only 0.5-1.5% in 2025.
Tymofiy Mylovanov from the Kyiv School of Economics believes that electricity problems could reduce GDP growth by one percentage point in 2025.
The second problem – and the most acute – is the lack of labor force. From 2022, mobilization, migration and war have reduced the labor force by more than a fifth, to 13 million people. Demand is high, with vacancies reaching 65,000 per week, up from 7,000 in the first weeks of the war, but the average vacancy has only 1.3 applications, down from two in 2021. Wages are increasing. The Ministries of Economy and Defense are in a state of tug-of-war over mobilization. The authorities of Ukraine have so far refused the maximalist demands of the military leaders to the detriment of the front.
There are no easy solutions. Currently, even those industries that are considered critically important can protect only half of their workers from the draft. It is difficult to hire more women, because there are not enough of them either, because many have gone abroad, says Hlib Vyshlinsky from the Center for Economic Strategy, an analytical center in Kyiv.
The lack of money worsens the situation – the third problem. Small farms and companies can hardly take a loan to finance their activities. Financing long-term capital expenditures is practically impossible. Rising costs of doing business affect profits. Companies with domestic customers pass some of the price increases through themselves, fueling inflation. Exporters competing on world markets do not have such an opportunity.
The government also spends much more money than it receives. According to forecasts, in 2025 the budget deficit will amount to about 20% of GDP. Almost all of this amount – 38 billion dollars – will be financed from external sources.
Ukraine also has significant foreign exchange reserves. According to forecasts, by the end of 2024 they will grow to 43 billion dollars – five months’ worth of imports. However, if the US refuses to participate, Ukraine may be left without means of livelihood as early as 2026. Cash-strapped and political-challenged EU governments are unlikely to be able to pay another big bill. Ukraine’s opportunities to raise additional funds within the country are limited.
Military events may lead to a crisis by 2026. However, business is cautiously optimistic.
Ukraine’s economy – experts’ forecastAnalysts of the ICU investment group believe that by the end of 2025, inflation in Ukraine may slow down to 7%, and the dollar exchange rate may rise to the level of 45.7 hryvnias.
According to Vitaliy Vavryshchuk, head of the macroeconomic research department of the ICU group, the Ukrainian economy will function in those safe conditions for most of the year. Experts do not expect a ceasefire agreement in any format to be reached anytime soon.
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