The EC has significantly improved its forecast for Ukraine’s 2023 GDP from 0.6% to 4.8%.

At the same time, the forecast for 2024 was reduced from 4% to 3.7%; in 2025 GDP growth is expected to be 6.1%.

“Despite serious problems caused by Russia’s aggressive war, Ukraine’s economy demonstrated remarkable resilience in 2023 due to exceptional harvests, government incentives backed by unwavering support from international partners, and the authorities’ commitment to ensuring macro-financial stability,” the report says.

However, by the end of the projected horizon, real GDP will remain approximately 20% below the pre-war level. In addition, annual inflation is forecast to ease to 7.6% in 2025 after a sharp decline in 2023. The budget deficit will remain elevated in 2024 due to high defense spending. However, higher nominal GDP growth rates should increase revenues in 2025 and contribute to deficit reduction.

Public debt will steadily increase throughout the forecast horizon. It is expected to increase to just below 100% of GDP by 2025.