The international rating agency Fitch Ratings predicts that in 2025, Ukraine’s economy will face a slowdown in growth amid the ongoing war, labor shortages, and infrastructure damage. At the same time, significant inflation growth is expected to exceed 10%.
This is reported by Finway
Main Reasons for Economic Growth Slowdown
According to Fitch’s estimates, Ukraine’s real GDP grew by 2.9% in 2024. However, the forecast for 2025 has been downgraded to 2.5% due to a number of negative factors. The agency’s report states that this is related to the prolonged labor shortage, damage to the gas infrastructure due to attacks, and the closure of the Pokrovsk mine due to the war.
“This is related to the ongoing labor shortage, damage from attacks on the gas infrastructure, and the closure of the Pokrovsk mine due to the war,” the publication states.
The National Bank of Ukraine raised the key interest rate by 250 basis points to 15.5% in December 2024. This was due to rising inflation: in April 2025, it reached 15.1% after an average of 6.5% in 2024. Fitch points out that price pressures are particularly caused by poor harvests, increased electricity tariffs, and rising mobile communication costs.
It is forecasted that the average annual inflation in 2025 will be 12.3%, and it will decrease to 6.5% in 2026.
Financial Support and Budget Deficit
Fitch analysts note that in 2025, Ukraine will receive significant foreign financial assistance, which will fully cover the state’s needs and create an additional liquidity buffer for the future. It is expected that net external financing will reach $55 billion, significantly exceeding the average annual figure of $25 billion for 2022–2024. This has been made possible by the early mobilization of profits from frozen Russian assets.
The IMF program provides for the formation of Ukraine’s currency reserves through foreign aid: in 2025 – $9.1 billion, and in 2026–2027 – $8.4 billion to cover the budget deficit.
At the same time, Fitch warns of high uncertainty regarding financing after 2025, which is likely to lead to an increase in domestic borrowing in 2026.
The fiscal deficit in 2024 decreased to 17.2% of GDP due to high budget revenues, despite the slowdown in economic growth. The forecast for 2025 is an increase in the deficit to 19.3% of GDP.
Government spending will remain high even after the war ends, as Ukraine is likely to maintain strong armed forces. According to World Bank estimates, $524 billion will be needed for the country’s recovery over the next decade. This amount is nearly 2.8 times the nominal GDP of Ukraine for 2024.