Investment company Capital Times has presented an analytical report titled “Ukraine’s Macroeconomics 2024-2025” for the first half of 2024. The company’s analysts conducted a study of the current economic situation in the country and highlighted the key challenges and opportunities facing the Ukrainian economy in the near future.
The team analyzed the quarterly dynamics of Ukraine’s real GDP over the past three years and developed their own macroeconomic forecast, which serves as an important guide for Ukrainian businesses, especially in the context of a full-scale war.
Capital Times experts examined the most significant aspects influencing Ukraine’s economic development, including:
- Reasons for the economic slowdown and the conditions under which improvement is possible. Analysts noted that Ukraine’s economy has slowed down due to a number of factors, including a reduction in foreign financial aid, internal mobilization processes, issues with electricity supply, and, as a result, an increase in trade and budget deficits. Improvement is possible through the implementation of budgetary stimulus measures announced by the government.
- The structure of financing Ukraine’s state budget. According to analysts, Ukraine will attract $37 billion in financial aid from partners in 2024 and $30 billion in 2025. Economic activities, social initiatives, and healthcare remain critically underfunded. The budget deficit is expected to reach $38.7 billion, or 20.5% of GDP, by the end of 2024, which is less than $46 billion (26% of GDP) in 2023.
- Inflation and the state of the hryvnia. Inflation in Ukraine decreased to minimal levels in the second quarter of 2024, but the hryvnia continues to depreciate, losing 7.1% against the US dollar since the beginning of the year. The main reason for this is accumulated structural problems and a reduction in foreign financial support.
- Tax increases amid reduced financial aid. As noted, delays in financial assistance from partners in the first half of the year led to delays in budgetary funding for defense needs. The Verkhovna Rada approved an increase in defense spending through proposed tax hikes in the fall, which could create additional pressure on businesses.
- The impact of the full-scale war on the economy and the NBU’s policy in this regard. The National Bank implements a flexible exchange rate policy while simultaneously easing monetary policy. Next year, Ukraine should be more resilient in terms of internal financing and providing the military with locally produced resources. An additional source of budget financing will be increased revenues from higher tax burdens.
Taking into account economic trends will allow IT companies to better forecast the market, plan investments, and assess risks, ensuring sustainable growth even in challenging conditions. The IT sector, as one of the drivers of economic development, has the opportunity not only to adapt its strategies to changes in the external environment but also to actively influence the country’s economic development.
Full report – here.
