The EBRD has downgraded its forecast for Ukraine's economic growth in 2025 to 3.5%.

The European Bank for Reconstruction and Development (EBRD) has lowered its economic growth forecast for Ukraine in 2025 to 3.5%. Previously, in September of last year, the forecast was set at 4.7%.

As the bank notes, Ukraine began 2025 with low economic indicators and rising inflation. The EBRD revised its annual forecast downward due to ongoing Russian attacks on the country’s energy infrastructure, which hinder production.

"GDP growth in Ukraine is expected to reach 3.5% in 2025, and accelerate to 5% in 2026 if a ceasefire is achieved by the end of 2025," the bank's review states.

Negative Factors Despite starting 2025 with external financing covering the year, the country is facing a slowdown in economic growth and rising inflation due to the ongoing impacts of the war that has persisted since February 2022.

The continuation of the war and massive Russian attacks on energy infrastructure have led to electricity shortages, forcing Ukrainians to pay high prices for imported electricity, as well as a severe labor shortage. Real GDP growth has significantly slowed from over 5% in the first half of 2024 to around 2% in the second half; the overall GDP figure for 2024 is estimated at 3%.

According to the bank’s data, the resurgence of inflation in the second half of 2024 was linked to rising electricity prices, adjustments to regulated utility prices, rapid growth in real wages, and currency devaluation against the U.S. dollar following the weakening of the exchange peg in October 2023.

Annual inflation reached 12% in December 2024 and is likely to remain at this level in the first half of 2025, before decreasing to single digits by the end of the year.

The bank forecasts that the negative factors affecting growth in the second half of 2024 are expected to persist in 2025 as well. However, among the positive aspects supporting economic growth are the resilience and adaptability of businesses, the effectively operating Black Sea trade corridor, strong government demand, and increased military procurement from Ukrainian producers.