“National Bank predicts slower economic recovery than last yearThe National Bank of Ukraine forecasts GDP growth of 2.1% in 2025, which is slower than last year. This is due to increased
shelling, infrastructure losses, and negative migration trends.
”, — write: unn.ua
DetailsIn the first half of 2025, economic growth continued, but was limited due to intensified shelling, further losses of production capacities, infrastructure, and housing, as well as negative migration trends.
Despite the challenges of the full-scale war, in Q1 2025, the economy predictably returned to growth (real GDP increased by 0.9% y/y after a 0.1% y/y contraction in Q4 2024). This was primarily facilitated by relative stability in electricity supply and sustained domestic demand. In Q2 2025, according to NBU estimates, growth rates remained subdued (1.1% y/y) primarily due to the deteriorating security situation both at the front and in frontline regions, as well as in the rear, and further losses of production capacities, infrastructure, and housing. This, in particular, led to a weakening of business expectations, which in Q2 were generally above the neutral level. The Business Expectations Index (BEI) decreased from 108.2% in Q1 2025 to 103.1% in Q2 2025 (the index decreased in all sectors except construction, and in trade, it moved into negative territory).
Massive shelling by the Russian Federation negatively affected economic activity in a number of industrial sectors. The situation in the mining industry remained difficult against the backdrop of the destruction of gas production infrastructure, although the restoration of gas production capacities continues. Gas shortages and damage to fertilizer production enterprises hindered the work of the chemical industry during the active season. The consequences of hostilities near Pokrovsk and the deterioration of external price conditions hindered the work of the mining and metallurgical complex.
Against the backdrop of a reduction in agricultural raw material stocks from the last harvest to a minimum level, the decline in the food industry and transport sector continued14, with some of their capacities remaining idle. The increase in raw material costs additionally pressured the profitability of livestock production due to rising feed prices. Livestock, milk processing, and meat processing sectors were also constrained by a further decrease in livestock numbers and the reintroduction of trade restrictions by the EU.
Weather conditions in the first half of 2025 also negatively affected economic activity. Due to spring frosts, the supply of vegetable and fruit and berry products decreased, and the uneven ripening of early grains and oilseeds and variable weather in June hindered the progress of harvesting, as a result of which the contribution of agriculture to GDP in Q2 was negative. Colder and more variable weather than in the previous year at the beginning of summer also limited the activity of the hotel and restaurant business.
In the second half of the year, economic activity will be supported by sustained domestic demand, soft fiscal policy, and a lower electricity deficit than last year. However, the deteriorating security situation and new losses of infrastructure and production capacities due to intensified shelling in the first half of the year, and a downward revision of crop yields for a number of crops due to unfavorable weather conditions at the beginning of the year, led to a revision of the real GDP forecast for 2025 towards slower growth – to 2.1%.
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The baseline scenario of the macro-forecast assumes a slow normalization of economic conditions, so economic growth in 2026 will accelerate only to 2.3%. Significant fiscal stimuli, made possible by substantial international aid, will support household consumption, partially compensating for the low growth rates of private investment.
In 2027, the growth rate of real GDP will accelerate to almost 3% per year due to the revitalization of investment and consumption. State support for the economy will decrease, so private investment will become the main driver of economic growth. Consumption will increase against the backdrop of further growth in real wages and the gradual return of migrants to Ukraine.
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