Ukraine’s economy, though still a quarter smaller than its pre-2021 level, is beginning to show signs of resilience and even surpasses Russia in several key indicators, according to a report by The Economist.
For the first time since the full-scale invasion in 2022, Ukraine is projecting significant economic growth. The National Bank of Ukraine (NBU) forecasts GDP growth of 4% in 2024 and 4.3% in 2025. The country’s currency has stabilised, and the interest rate has dropped to 13.5%, the lowest in 30 months.
In contrast, Russia’s economic challenges are mounting. Interest rates may soon reach 23% as the central bank seeks to stabilise the rouble. The Russian economy is forecasted to grow by only 0.5% to 1.5% in 2025, while its banking sector remains fragile.
Despite these gains, Ukraine faces critical challenges, including the ongoing war, dwindling domestic resources, and potential shifts in international political support, particularly from the United States.
Key Strategic Measures
Ukraine has adapted to disruptions caused by the war, notably in grain exports. Following Russia’s withdrawal from the Black Sea grain deal in July 2023, Ukraine opened its own maritime corridor. Supported by drone and missile defence measures, this initiative has restored exports of not only grain but also metals and minerals, key contributors to Ukraine’s economy.
Western financial and military aid has played a significant role in maintaining Ukraine’s economic stability. However, the country now confronts severe shortages in energy, manpower, and financial resources.
Energy and Workforce Challenges
Ukraine has bolstered its energy resilience by increasing electricity import capacity from the EU by nearly 25%, reaching 2.1 GW in December 2024. Additionally, food manufacturers have begun converting production waste into biogas for energy self-sufficiency, while industrial enterprises are combining renewable energy with imports to avoid widespread power outages.
Andriy Pyshnyy, head of the NBU, projects that ongoing repairs to the energy grid will limit the electricity shortfall to 6% of total demand in 2025 and 3% in 2026.
Labour shortages remain a pressing issue. Mobilisation, migration, and war have reduced the workforce by over 20%, leaving only 13 million workers. Job vacancies have risen sharply, with 65,000 openings per week compared to just 7,000 during the early months of the war. Yet, the ratio of applicants to jobs has dropped significantly, creating a tight labour market.
The Ministries of Economy and Defence are struggling to balance military and civilian workforce needs. Currently, even critical industries can protect only half of their employees from mobilisation.
Financial Strains
Access to financing remains a significant hurdle for Ukrainian businesses. Small farms and enterprises struggle to secure loans, while long-term investments have become nearly impossible. Rising operational costs are eroding profits, with businesses serving domestic markets passing costs onto consumers, exacerbating inflation. Exporters, competing globally, lack this flexibility.
The state faces an equally dire fiscal situation. Ukraine’s budget deficit is projected to reach 20% of GDP in 2025, equating to $38 billion. This shortfall is expected to be covered largely by external financing.
In June, G7 countries pledged $50 billion in aid, to be repaid from interest earned on $273 billion in frozen Russian assets. However, U.S. support for this plan is uncertain.
Outlook for 2025 and Beyond
Despite the challenges, Ukraine is expected to manage through 2025, even without U.S. financial backing. Contributions from the EU, including an €18 billion package, and other G7 countries are likely to bridge the gap, according to Dimitar Bogov of the European Bank for Reconstruction and Development.
Ukraine’s foreign currency reserves are projected to reach $43 billion by the end of 2024, covering five months of imports. However, without continued U.S. support, Ukraine risks a financial crisis by 2026.
The Balancing Act: Ukraine’s Struggle and Progress in a Time of War
Ukraine’s economic resilience demonstrates its capacity to adapt under extraordinary pressures. By addressing energy, labour, and financial challenges, the country has managed to sustain its economy while countering Russian aggression. However, sustained international support remains crucial for Ukraine’s long-term stability and recovery.
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