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EC exacerbates GDP growth in Ukraine

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An additional slowdown in economic activity is expected, as the war continues to pressure the production capabilities and business moods in Ukraine.

The European Commission exacerbated Ukraine’s GDP growth forecasts from 2025 to 2.0% with 2.8% expected in November, and in 2026 – respectively, up to 4.7% from 5.9%. This is stated in the document published on May 19.

A further slowdown in economic activity is predicted, as the war continues to provide significant pressure on the production capabilities and business moods in Ukraine.

Exports will decrease, which reflects the decline in industrial production, especially in the energy industries affected by high -energy prices, as well as closing pokrovskoye, a major supplier for the metallurgical industry, “the European Commission said.

It is expected that agricultural exports will also decrease due to the decrease of stocks after a bad yield of 2024, which is caused by adverse weather conditions.

According to EC experts, highly imported demand for energy sources, coal and materials related to defense and rebuilding will maintain a high level of import, which will lead to a negative contribution of pure exporting GDP growth.

According to the forecast, exporting to 2025 will only increase by 1.8%, while by 2026 -by 11.4%, while importing will be 5.5%and 6.0%, respectively.

Internal demand, as expected, will remain resistant due to a significant investment increase, supported by stable defense costs and current emergency repair and reconstruction, especially in the energy sector. According to the forecast, private consumption will remain a major growth driver, even a slower pace, as high inflation will continue to undermine the power of household purchases.

According to the forecast, in the future, up to 2026, the growth of the real GDP will accelerate by 4.7% with the technical assumption that from the beginning of the year the conditions will be created for gradual increasing efforts to be restored in the early stages. It is expected that restoration will occur due to the growth of investments in rebuilding, removing narrow areas to export and improving economic confidence, which must exceed restraint from gradual reduction in defense costs. It is expected that the account of the current operation will remain negative throughout the forecast period, reflecting a significant trade shortage and weakening of the second income balance, as international grants have been replaced by loans.

Lack of external trade of goods, according to EC expectations, will increase this year to 16.2% of GDP from 15.9% of GDP last year, and the next one will lower 14.8% of GDP, the balance of payment deficiency will increase this year to 13.2% of GDP from 8.1% of GDP last year, and the next year will fall to 11.5% of GDP.

As the EC emphasizes, the forecast is characterized by a very high level of uncertainty, and the risks are inclined to the destruction. Destruction of the safety situation can enhance the destruction of critical infrastructure, leading to further interruptions in sea export and deepen the lack of labor due to long-term mobilization and external transition. On the other hand, a rapid improvement in the security situation can put a path to a faster and greater restoration.

The report states that the large -scale movement of the population, together with the draft for military service, significantly reduced the amount of labor from the beginning of the invasion, which led to an acute deficiency and prompted the average nominal wage to an increase of 23% in 2024. Despite the alleged jubual return of A part of internally displaced persons, it is expected that the shortage of labor will remain acute due to slow reintegration, the long impact of the war on labor and sustainable regional and inconsistency of qualification. Therefore, the unemployment rate, according to the forecast, will remain high, even if it gradually decreases: from 14.8% last year to 13.8% this year and 11.6% next year.

The EC believes that even if inflationary pressure will remain high on the forecast horizon, it will gradually weaken thanks to a strict financial policy that will prevent the price of prices and weaken the offer shocks. Thus, the average inflation after falling up to 6.5% last year reached a climax at 12.6% in 2025, and then slowed down to 7.7% to 2026.

It was reported that the lack of public administration sector was reduced to 17.3% of GDP in 2024 due to the introduction of steps to mobilize income, including increasing fuel and tobacco taxes, which helped to compensate for the growth of government spending. In 2025, further steps to mobilize income, including increasing military fees (1.4% of GDP) and a re -adoption of bank income tax (0.8% of GDP), are expected to continue to maintain budget revenues. However, the ongoing high cost pressure associated with the war, including defense, will maintain a budget deficit at a high level – about 18.4% of GDP.

By 2026, a stronger economic growth will contribute to further improving the income collection, and a gradual transfer of costs from military needs for restoration and rebuilding will contribute to a significant reduction in deficiency -up to 10.6% of GDP. According to the forecast, public debt will reach the peak of 109.8% of GDP in 2025 and down to 108.9% of GDP in 2026, which will support an unpredictable decline in this year’s deficiency.

Remember, according to the NBU, in the first quarter of 2025, the Ukrainian economy rose 0.5% in the annual scale

UN expects global GDP growth to 2.4%

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Source: korrespondent

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