“In 2024, Ukraine’s economy continued its path of gradual recovery after years of economic turmoil caused by full-scale Russian aggression, the energy crisis, and global economic challenges. This year can be characterized as a period of stabilization, although it also left behind a number of unresolved problems that will affect the further development of the country. The recovery was accompanied by both positive achievements and risks, which”, — write on: ua.news
In 2024, Ukraine’s economy continued its path of gradual recovery after years of economic turmoil caused by full-scale Russian aggression, the energy crisis, and global economic challenges. This year can be characterized as a period of stabilization, although it also left behind a number of unresolved problems that will affect the further development of the country. The recovery was accompanied by both positive achievements and risks that should be taken into account when planning the policy for 2025.
What are the results of 2024 for the Ukrainian economy? What were the challenges and challenges? What can await us in 2025? The UA.News agency figured out the issue.
Economic results of 2024
The main indicator of relatively positive economic dynamics in 2024 was GDP growth. According to the estimates of the Ministry of Economy of Ukraine, the real gross domestic product increased by 4.3% compared to 2023 in the first two quarters. It is expected that our state will end this year with a GDP growth of at least 3.5%. In general, this is a good indicator – especially for a country that is at war.
This means that the economy is gradually recovering from the critical losses caused by the war, but is still well below pre-war levels. After all, according to official data, in 2022 our GDP fell by 30%. And the economy still has a long and difficult road to recovery.
The main economic drivers of growth were:
- increase in the export of agricultural products,
- restoration of industrial production in regions not affected by hostilities,
- support of international partners in the form of grants and loans.
An important factor was also the gradual increase in consumer activity within the country, as the population gradually adapted to new living conditions. Although, of course, pre-war consumption volumes are not usually discussed now.
At the same time, it is worth noting that the structure of Ukrainian GDP remains extremely vulnerable. A significant part of the economy is occupied by the raw material sector, namely the export of grain and metals. Such dependence makes the country vulnerable to external shocks, in particular changes in world prices for raw materials. During 2024, Ukraine exported goods worth about $35-36 billion, which is almost 13% higher than last year. But the structure of exports shows the preservation of dependence on traditional markets and goods. The IT industry also continued to grow, although the rate of expansion slowed compared to previous years.
The hryvnia-to-dollar exchange rate remained relatively stable in 2024, fluctuating between 40-42 hryvnias per dollar. This became possible thanks to the active actions of the National Bank of Ukraine, which continued the policy of currency interventions, as well as the receipt of international financial aid. On the other hand, the growth in demand for the currency due to the need to import energy carriers and some structural problems could create additional pressure on the hryvnia. However, overall the foreign exchange market remained manageable, which was an important achievement in difficult conditions.
Inflation in 2024 amounted to 9.5-10%, which generally corresponded to the forecasts of the National Bank. The main factors of the price increase were the increase in the price of energy carriers, the increase in the cost of services and food products. However, the government managed to avoid a sharp jump in prices, in particular thanks to the continuation of the policy of subsidizing certain categories of the population and controlling the prices of basic food products. Inflationary pressures were also contained thanks to relatively low prices on the global oil and gas markets.
Despite positive trends, Ukraine’s economy still faces numerous problems. First of all, we have a situation where, in numbers, the economy shows, albeit small, growth – and at the same time, the majority of the population does not see positive changes in the situation. After all, inflation, devaluation and price growth “eat up” salary increases and indexation of social benefits.
The security situation remains one of the biggest. Ongoing military operations and constant Russian shelling of the entire territory of Ukraine create strategic uncertainty, which strongly restrains investment activity. Foreign direct investment in 2024 remained at an extremely low level, because investors are simply afraid to invest in conditions of instability.
Most of the investments were directed to the western regions of the country, which remain relatively safe. Because of this, an internal imbalance arises: certain regions manage to get rich during the war, while others actually “die out” economically. And although this is explained by absolutely objective factors (that is, there is no conspiracy or “betrayal” here, only new economic realities), it can still be a big problem in the future and lead not only to economic problems, but also to social tension.
The state budget deficit also remains a significant problem. It will reach about $20 billion in 2024, one of the highest in the world as a percentage of GDP. This requires significant support from international partners, as well as a strict fiscal policy. The growth of public debt creates additional pressure on the economy, as a significant part of the budget is directed to servicing debt obligations.
Ukraine has already adopted tough and unpopular fiscal decisions. In particular, the president has already signed the law on the historic increase in taxes. The UA.News agency made a detailed analysis of this topic, and in short: even such actions, according to experts, will not necessarily lead to positive changes in the economy. At most, they can have a negative impact on business activity and hurt business. And thus the budget will only lose money in the form of taxes.
Opinions of experts
Economic expert, candidate of economic sciences Vadym Sirota believes that there are three challenges facing the domestic economy globally. Success or failure in the future will depend on overcoming them.
“The first thing I would highlight is excessive dependence on financial assistance from Western partners. In fact, our economy is in a coma because of it. Because it is very dependent on Western support. With our own income, we cover only about half of the expenses, no more than 50%. And because of that, we constantly have a big budget deficit. This is the first large-scale challenge.
The second is the interesting factor of Donald Trump. How will the new American president behave? Will Americans decide to stop funding or its minimization? This is still not clear. And this is a kind of risk of uncertainty, and it is very colossal, unfortunately. Uncertainty about the amount of Western support. If there is no Western support, we will have to somehow cover all costs at the expense of other resources, including domestic ones, which are not so plentiful.
The third is infrastructural problems. Such large-scale strikes on energy affect everything: both business and citizens. They completely paralyze economic activity, the economic activity of Ukraine. Because of this, industrial clusters: Kharkiv, Dnipro, Kryvyi Rih are particularly affected,” the expert says.
Separately, Sirota mentioned demography as another pressing challenge for the economy. He gave an example when, as a result of mobilization, men are, as it were, “taken away” from the economy. And there is already information pumping going on so that women do men’s work while the latter are fighting. But this is an “abnormal situation” and a “Pyrrhic victory,” the economist is confident.
Vadym Syrota offers to get out of this situation thanks to the application of policies based on Keynesian principles. That is, a greater regulatory role is needed. In addition, it is necessary to actively develop industry and eliminate “grey” economic schemes, the expert summarized.
Economic expert Yurii Havrilechko the main success of 2024 is the fact that the economy in our country still exists. At the same time, they are actively trying to destroy it, the economist is confident.
“To sum up, I’ll start with the positive. Despite the coordinated activities of the Verkhovna Rada, the government and the National Bank to destroy the economy of Ukraine, it is still holding on. Parliament continues its destabilizing activities, breaking legislation and introducing new taxes retroactively. This law has already been signed by the president.
The second point that I would like to draw special attention to is that the parliament has passed a law that allows blocking the work of any company without any reason. This is extrajudicial blocking of business activity. In civilized countries, this is considered a criminal offense. And in our country it is legally allowed. Accordingly, regulatory procedures are once again becoming more complicated in our country. But if our regulatory system is more complex than the structure of the economy, then this economy is doomed to fall into the abyss in any case.
Well, I also want to say something about the activities of the National Bank. Who, for some reason, takes care of the transfers of physical persons from card to card. In fact, our National Bank is struggling with non-existent problems. But at the same time it makes life difficult for everyone else. For example, limiting the use of citizens’ own funds. This is either fraud or theft. Because on what basis are we forbidden to use our own funds? If there is any suspicion, then go to court…. This will primarily concern FOPs. 27% FOPs are already planning to close in the near future. This is a consequence of the activities of the parliament regarding the increase in taxation and the government regarding the complication of reporting, and the NBU regarding restrictions on financial transactions,” Gavrilechko believes.
For the next year, the expert predicts an increase in the level of corruption, a further deepening of structural problems in the economy, and an increase in Ukraine’s financial dependence on Western partners. According to Havrilechko, he does not see optimistic scenarios.
Forecast for 2025
The outlook for 2025 remains mixed. Economists forecast GDP growth in the range of 2.7-3.5%, depending on the development of the situation at the front, the foreign economic situation and the effectiveness of the government’s economic policy. It is expected that the main driver of growth will remain the agro-industrial sector, as well as the export of IT services. At the same time, in order to achieve higher rates of economic development, the government should promote the diversification of the economy, in particular through the support of high-tech industries.
The budget deficit problem will be even more acute than last year. According to Prime Minister Denys Shmyhal, by 2025 the deficit will amount to as much as 35 billion dollars. The head of the government claims that Ukraine will be able to cover approximately 20 billion of this amount. However, where to get another 15 billion is still unclear. Active work will be conducted on this issue.
Inflation in 2025 may stay around 9.5% due to the expected increase in energy tariffs, as well as the increase in producer costs. This, most likely, will have a negative impact on the already generally rather low standard of living of the population, especially the vulnerable categories, which will feel the greatest impact.
The government had plans to strengthen social protection programs, but their effectiveness would depend on the availability of resources. In addition, Ukraine spends almost everything it earns on war and the defense sector. Unfortunately, in such conditions, social programs often go under the knife.
The exchange rate of the hryvnia to the dollar, according to analysts, can be up to 43-45 hryvnias per dollar. The government’s macro forecast of the exchange rate is also 45 hryvnias per dollar.
This is explained by the expected increase in the trade balance deficit, which may reach a record level in 2025. Devaluation can also be caused by high demand for currency for energy purchases. At the same time, the preservation of international financial assistance and the controlled monetary policy of the NBU will help to avoid sharp fluctuations.
Attracting investments will remain one of the key challenges in 2025. The government plans to introduce new investment incentives, including tax breaks and state insurance programs for foreign investors. However, the success of these initiatives will depend on the actual situation at the front, as well as on ensuring the rule of law and overcoming corruption. And with this, large-scale and systemic problems are still being recorded in our country.
Summarizing, we can conclude that 2024 was an important step on the way to the recovery of the Ukrainian economy, although this process remains long and difficult. Success will depend on the government’s ability to effectively respond to the challenges facing the country and use existing opportunities to modernize the economy. And 2025 can become decisive in many aspects, because Ukraine has a chance to lay the foundations for sustainable development in the future. But this requires coordinated and coordinated work of all branches of government, business, and society, and active participation of international partners.
Nikita Trachuk