Ukraine's Economy Faces Challenges Amid Ongoing War, Receives EU Support

Ukraine's economy continues to face significant challenges in 2024 as the war with Russia persists, according to Yaroslav Zhelezniak's "Ukrainian Economy in Brief" newsletter summarizing key economic events from April 15-22. The Ministry of Economy published a consensus forecast outlining two scenarios for the country's economic recovery, with real GDP growth projected at 5% if the war ends in 2024 or 3.5% if it lasts longer. However, even in the more optimistic scenario, Ukraine's GDP is not expected to reach 2021 levels by 2027.

The forecast also predicts high consumer inflation, ranging from 8.2% to 9.2% in 2025, depending on the war's duration. The exchange rate is expected to reach up to UAH 49.60 per USD by 2027, with the average annual rate at UAH 46.37 per USD. The budget deficit is projected to remain high due to defense and social security needs, with the economy critically dependent on revenues from international partners.

Why this matters: Ukraine's economic recovery and stability are essential for the country's future and its ability to rebuild after the war. The ongoing conflict continues to strain Ukraine's resources and hinder its growth potential, making international support and investments vital for the nation's resilience and development.

Despite these challenges, Ukraine has received support from the European Union. The European Commission disbursed the second installment of exceptional bridge financing to Ukraine under the Ukraine Facility, amounting to €1.5 billion. This follows a positive assessment of Ukraine's progress in reforms related to the judiciary, anti-money laundering, public finance management, business environment, and agriculture. The disbursement is part of the €50 billion Ukraine Facility, which aims to provide stable financing for Ukraine's recovery, reconstruction, and modernization from 2024 to 2027.

In addition to financial support, Ukraine has established a Coalition Support Office to manage military assistance from partner countries systematically. Allies have created eight coalitions, including the Aviation Capabilities Coalition and the Air and Missile Defense Coalition. France plans to provide Ukraine with Aster 30 long-range missiles for SAMP/T ground and naval air defense systems as part of a military aid package.

The Ukrainian parliament has also passed legislation to increase the State Border Guard Service by 15,000 servicemen, bringing the total number to 75,000, with 67,000 military personnel. This move aims to ensure combat readiness and maintain control of internationally recognized borders in the post-war period.

As Ukraine continues to face economic and security challenges, the international community's support remains crucial. The European Union's

Key Takeaways

• Ukraine's economy faces 5% or 3.5% growth in 2024, depending on war duration
• Inflation to reach 8.2-9.2% in 2025, exchange rate up to UAH 49.60/USD by 2027
• Ukraine critically dependent on international support to address budget deficit
• EU provides €1.5B in bridge financing, supports Ukraine's reforms and recovery
• Ukraine expands border guard by 15,000 to maintain control of borders post-war