Despite ongoing military conflicts and an energy crisis, Ukraine’s financial system has managed to maintain a degree of stability, largely due to international assistance. However, deteriorating GDP forecasts and fluctuations in the currency market have prompted citizens to reconsider the safety of their savings.
In an interview with RBC-Ukraine, Oleksandr Martynenko, head of corporate analysis at investment group ICU, discusses the potential for the hryvnia to reach 45 per dollar, the appeal of hryvnia-denominated government bonds over deposits, and the implications of the rapid development of artificial intelligence.
Key Points:
- GDP Forecast Adjusted: ICU has revised its economic growth expectation from 1.2% to 0.8% due to infrastructure damage.
- Hryvnia Outlook: The investment group predicts a moderate depreciation of the hryvnia, estimating a value of 45 per dollar by year-end.
- Government Bonds More Attractive: Hryvnia-denominated government bonds offer higher returns and are tax-exempt compared to deposits.
- Impact of Middle Eastern Conflict: The conflict has benefited Russia while posing challenges for Ukraine, with oil prices rising over 30% from pre-war levels.
- Effective Sanctions: Strikes on Russian oil infrastructure are viewed as the most effective sanctions, as traditional measures have had limited impact.
State of the Ukrainian Economy: Between Growth and Survival
Martynenko acknowledges that many economists have recently pointed to a depletion of growth drivers. When asked about ICU’s revised forecasts for 2026, he stated, “The economic situation is indeed deteriorating, but it is essential to understand how sustainable this trend will be.” The significant damage caused by Russian attacks led to a downward revision of the real GDP growth forecast for this year to 0.8% from an earlier estimate of 1.2%.
He noted that the destruction of infrastructure and production capacities, particularly in the energy and industrial sectors, has played a crucial role in this adjustment. Sectors reliant on stable electricity supply accounted for approximately 20-25% of GDP at that time. Additionally, a slowdown in consumption growth, which began last year, has contributed to the negative outlook.
Martynenko stated, “The government is attempting to reduce the substantial budget deficit, which means lower revenues and further consumption slowdown, subsequently impacting GDP.” However, he emphasized that it is premature to declare an economic crisis. He remarked, “As a country engaged in a devastating war, the Ukrainian economy cannot function independently; international assistance remains critical in covering our budget deficit and substantial external account shortfall.”
Currency and Personal Finance
Regarding recent fluctuations in the currency market, Martynenko highlighted that the primary factor is the receipt of financial aid. He expressed confidence that significant depreciation of the hryvnia is not expected this year, maintaining a forecast of 45 hryvnias per dollar by year-end, which would represent a 6% decline from the beginning of the year. He added, “A moderate depreciation of the hryvnia is actually necessary for the economy. It would increase hryvnia revenues from the sale of foreign currency aid and taxes on imported goods.”
When discussing the currency’s recent performance, he noted that the hryvnia had reached 44 against the dollar and that the euro had also seen sharp increases. He cautioned that predicting currency behavior in the near term is challenging, as it largely depends on the actions of the National Bank of Ukraine (NBU).
Martynenko remarked on the long-standing habit of Ukrainians to hold their savings in dollars, stating, “This remains a critical indicator influencing our investment decisions.” He suggested that individuals should consider diversifying their portfolios across different currencies and financial instruments, including government bonds, deposits, and gold.
Global Turbulence and Its Impact on Ukraine
Martynenko discussed the ongoing geopolitical changes and their implications for Ukraine’s role in a potentially deglobalized world. He believes that Ukraine can maintain its significance as a supplier of agricultural products and that the ongoing conflict has accelerated the development of defense technologies, which may gain traction in international markets.
He concluded by asserting that while the defense sector is still emerging as a driver of the economy, continued investment and international partnerships could enhance its role in the future.
The Ukrainian economy is grappling with challenges stemming from ongoing military conflict and infrastructure damage, leading to revised GDP growth forecasts. Despite these difficulties, international support has helped maintain a degree of financial stability, with a focus on currency management and investment strategies.