The National Bank of Ukraine has estimated the growth of Ukraine’s real gross domestic product (GDP) in the third quarter of 2024 at 4% compared to the same period last year, while previously it had forecast it at 3.1%.
“The harvesting of late crops started earlier than last year and continues, which supported the agricultural performance in the third quarter. Stable operation of the sea corridor and loose fiscal policy also supported economic activity,” the NBU said in its Inflation Report published on its website.
The NBU noted that such a revision of the economic dynamics assessment in the third quarter made it possible to raise the GDP growth forecast for this year from 3.7% to 4%.
It is specified that at the end of the third quarter, the harvested area of late crops was 81% higher than last year, and the harvest volume was 68% higher, the volume of cargo transshipment for export in seaports increased 2.1 times in the third quarter of 2024 compared to the third quarter of 2023, and the volume of rail freight increased by 15%.
“As in previous quarters, investment demand made a positive contribution to GDP growth in the third quarter. In particular, it was supported by public capital investment in defense and related projects, such as weapons production, as well as disaster relief spending,” the NBU added.
He also emphasized the growth of private sector investment due to further improvement in the financial results of enterprises and their significant needs for energy-autonomous equipment given the difficult situation in the energy sector.
Explaining the slowdown in growth to 2.4% in the fourth quarter, the NBU cited earlier harvesting of late grains and oilseeds and their significantly lower yields compared to last year as one of the reasons for the negative contribution of agriculture to real GDP.
As for 2025, the NBU has improved its growth forecast for the first quarter from 1.8% to 2.3%, and for the second quarter from 2.8% to 3.4%, expecting growth to accelerate to 4.6% in the third quarter and 6.3% in the fourth quarter, whereas previously it had estimated growth of 5.1-5.9% for the second half of the year.
As a result, the overall GDP growth forecast for next year has been improved from 4.1% to 4.3%, and in nominal terms by UAH 100 billion to UAH 8.72 trillion, while this year’s estimate of nominal GDP was raised by UAH 40 billion to UAH 7.63 trillion.
“In the future, Ukraine’s real GDP growth will accelerate (to 4.3% in 2025 and 4.6% in 2026). This will be facilitated by maintaining a loose fiscal policy, revival of domestic demand, which will be supported by wage growth, increased harvests and stable external demand, as well as investments in recovery, in particular in the energy sector,” the NBU said.
At the same time, he emphasized that economic growth will be constrained by a shortage of labor, security risks, migration processes, and the slow normalization of economic conditions.
In the updated report, the NBU retained three key risks to the forecast (with a strong impact and a probability of 25-50%): a longer duration and intensity of the war, higher budgetary needs, and a greater energy deficit due to further damage to the energy infrastructure.
Among the negative risks with a high probability (25-50%), the NBU added the potential pass-through to prices of higher interest rates or additional taxes, although the NBU assesses its impact as moderate.
The impact of the risk of more intense and prolonged blocking of cargo traffic across the border with certain EU countries remains weak in the updated Inflation Report, with the probability decreasing to less than 15%.
The NBU added increased emigration to the risk of rising geopolitical tensions with a moderate impact and a probability of 15-25%.
In addition, the probability of a positive risk, i.e. the rapid restoration of damaged energy infrastructure, has been reduced from 15-25% to less than 15%.
“The balance of risks in the baseline forecast is shifted towards increased price pressure,” the NBU said.
As reported, Ukraine’s GDP, according to the State Statistics Service, grew by 5.3% in 2023 after a 28.8% decline in 2022, including 4.7% growth in the fourth quarter of last year. In the first quarter of this year, the State Statistics Service estimated GDP growth at 6.5%, and in the second quarter – at 3.7%.
