According to Swedbank, the Estonian economy will return to growth in 2025 after a 0.8% contraction in 2024. GDP growth is projected at 1.5%, and in 2026 the economy may accelerate to 2.5%.
The main growth factors are export recovery and increased investment.
At the same time, household consumption in Estonia will remain relatively weak due to higher taxes and slower growth in real incomes. Inflation will reach 4% in 2025, which is higher than the euro area average. This is mainly due to tax policy and additional household spending.
Despite economic challenges, the labor market in Estonia remains resilient. The employment rate exceeds 69%, which is one of the highest in Europe. However, the rapid growth of wages is outpacing productivity growth, which poses additional risks to the competitiveness of the economy.
According to Swedbank’s forecast, Lithuania’s economy will grow by 3% in 2025 and by 2.5% in 2026. In 2024, the country’s GDP has already increased by 2.4%, driven by manufacturing growth and retail development.
Factors supporting economic growth include accelerating industrial production, active retail development, and public investment.
However, Lithuania faces serious challenges. In particular, a significant increase in defense spending is needed, which could reach 4-5% of GDP. In addition, the country will have to carry out tax reform, which may affect business and consumer incomes.
Another challenge is the rapid growth of wages, especially in the public sector. This puts pressure on the competitiveness of Lithuanian companies, which are forced to adapt to changing conditions. Inflation is projected at 3% in 2025, and in 2026 it will decline to 2.7%.
According to Swedbank, the Latvian economy will show growth of 2.2% in 2025, and in 2026 the pace will accelerate to 2.8%. After a 0.2% decline in GDP in 2024, signs of recovery appeared by the end of the year, which creates positive expectations for the next period.
The main drivers of growth will be an increase in exports, growth in household consumption, and increased public investment.
The labor market in Latvia remains stable: the unemployment rate continues to decline, and wages are growing, although the rate of increase is slowing. Inflation in 2025 is projected at 2.6%, which is moderate.
One of the key challenges for the economy remains the implementation of projects funded by the EU’s Recovery and Resilience Facility (RRF). All planned projects are due to be completed by mid-2026, and their successful implementation could be a catalyst for further economic growth.
Ukraine’s total public debt in 2024 rose to a new all-time high: by $22.74 billion, or 14.3%, to $166.06 billion in dollar terms, and by UAH 1 trillion 461.3 billion, or 26.5%, to UAH 6 trillion 980.9 billion in hryvnia terms, according to the website of the Ministry of Finance.
According to the data, the direct public debt increased by 16.5% in dollars to $159.20 billion, or UAH 6 trillion 692.4 billion, and accounted for 95.9% of the total public and publicly guaranteed debt.
In 2024, Ukraine’s total external public debt increased by 18.1%, or by $18.38 billion, to $114.88 billion, while the total internal public debt increased by 16.7%, or by UAH 276.0 billion, to UAH 1 trillion 863.1 billion.
As a result, the share of total external public debt increased from 70.0% to 72.3% over the year.
According to the Ministry of Finance, the share of liabilities in euros at the end of 2024 increased to 33.01%, in US dollars to 26.81%, in SDRs to 11.39%, in Canadian dollars to 2.83%, in British pounds to 0.11%, while in hryvnia it decreased to 25.33% and in yen to 0.51%.
The agency also clarified that 65.01% of the state debt has a fixed interest rate, while 11.39% is tied to the IMF rate, 12.66% to SOFR, 3.80% to EURIBOR, 0.51% to TORF and 0.10% to SONIA.
The rate for another 2.08% of government debt is tied to the consumer price index, and 4.17% to the NBU discount rate. These are government bonds from the NBU’s portfolio. The newest of these were the securities linked to the key policy rate, which the NBU bought as part of the issue financing of the 2022 budget.
Finally, 0.27% of the state debt has a rate linked to the Ukrainian index of rates on retail deposits, which is used in portfolio guarantee programs.
The Ministry of Finance previously noted that Russia’s full-scale invasion of Ukraine in 2022 led to a sharp increase in the ratio of public debt to GDP – from 43.3% at the end of 2021 to 79.4% at the end of 2023.
As reported, Ukraine’s public and publicly guaranteed debt increased by $13.4 billion in 2022 and by $33.9 billion in 2023.
The IMF, as part of the sixth review of the EFF Extended Fund Facility program with Ukraine last December, improved its forecast for public debt growth due to higher GDP growth and lower deficits: to 92.2% of GDP by the end of 2024 and to 104.3% by the end of 2025, while in October it estimated it at 95.6% of GDP and 106.6% of GDP, respectively.
Earlier, the Experts Club think tank and Maxim Urakin released a video analysis on the state of debt in the world, see more details on the YouTube channel: https://youtu.be/gq7twYrWuqE
Germany’s economy shows no signs of recovery: The country’s GDP will decline again in 2024, and stagnation is expected in 2025, according to a review by the Kiel Institute for the World Economy (IfW).
Experts expect Germany’s GDP to decline by 0.2% this year. The decline will be marked for the second year in a row – in 2023, the German economy shrank by 0.3%. In 2025, Germany’s GDP growth will be zero, analysts predict.
The autumn forecast predicted that the country’s GDP would decline by 0.1% in 2024 and grow by 0.5% in 2025.
The main reasons for the deterioration of the forecasts are the expected introduction of US tariffs and the deepening crisis in the German industry, IfW experts say.
“The crisis is largely a crisis of the manufacturing sector,” said Stefan Koots, head of the IfW’s economic forecasting department. – “It shows symptoms typical of the periods following major macro shocks.
“The German economy is struggling with a decline in competitiveness, which is reflected in the weakness of overall economic indicators, which hardly allow us to count on any upward impulses,” the expert added.
The growth rate of consumer prices in Germany will reach the European Central Bank’s (ECB) target of 2% only by the end of 2026, not 2025, as expected in the Institute’s previous forecast. The average inflation rate in 2024 and 2025 will be 2.2%, according to IfW.
Unemployment in Germany will be at 6% this year and 6.3% in 2025 and 2026, according to the IfW. This is worse than the fall forecast of 6.1% for 2025 and 5.9% for 2026.
Experts assume that Germany will be able to reduce the budget deficit from 2.6% of GDP in 2023 to 2.3% this year and 1.9% in 2025. In 2026, the budget deficit is projected at 2.1% of GDP. In the fall, IfW expected the budget deficit to be 1.7% in 2025 and 2026.
You can learn more about current trends in the global economy in the video analysis by Maksym Urakin and the Experts Cub think tank on the Experts Club YouTube channel: https://www.youtube.com/watch?v=grE5wjPaItI
Maksim Urakin, Founder of the Experts Club Information and Analytical Center, PhD in Economics, shared his observations on key indicators and risks for the Ukrainian and global economies as of November 2024.
Macroeconomic situation in Ukraine
According to Maksim Urakin, Ukraine’s economy continues to show slow growth.
“According to the National Bank, in October 2024, Ukraine’s GDP grew by 1.3% compared to October last year. This is worse than the September figures, but significantly better than the data for the summer months. However, there are negative trends in agriculture. This year’s harvest was significantly lower than last year’s, which hit the agricultural sector, one of the key drivers of the economy,” said Maksim Urakin.
The expert also pointed to a sharp deterioration in the foreign trade balance.
“The deficit of foreign trade in goods increased by almost 6% over the first nine months, reaching a frightening $20 billion. The main reasons for this were the growth of energy imports and the lack of labor at export-oriented enterprises,” Urakin added.
According to the expert, Ukraine’s national debt is also a cause for great concern.
“As of October 2024, the debt is already 6.4 trillion hryvnias, or about $155 billion. At the same time, international reserves have decreased by more than $2 billion and amount to $36 billion,” Urakin emphasized.
Global economy: challenges and prospects
At the global level, the key risks are associated with the growing debt burden.
“Global public debt already exceeds $100 trillion, which is 93% of global GDP. In the coming years, this figure will continue to grow, which puts additional pressure on the budgets of most countries,” Urakin said.
The economies of developed countries, according to the expert, show heterogeneous dynamics. The United States is showing steady growth, with its GDP increasing by almost 3% in the third quarter. At the same time, the eurozone economy is actually stagnating, and Germany has faced zero dynamics, the economist said.
At the same time, China continues to play a key role in the global economy. “In the third quarter, China’s GDP growth remained at 5%, but the pace slowed due to geopolitical tensions and internal problems, particularly in the construction sector,” said Maksim Urakin.
Looking to the future
Maksim Urakin expressed cautious optimism about the long-term prospects.
“The global economy is facing many challenges, including inflation, geopolitical conflicts and protectionism. However, despite all the difficulties, there are reasons to believe that growth will continue at least within moderate limits,” he concluded.
The expert also called for more active international coordination to overcome economic challenges.
“Stability requires joint efforts, and only through dialogue and cooperation will we be able to minimize risks,” summarized Maksim Urakin.
You can learn more about current trends in the global economy in the video on the Experts Club YouTube channel: https://www.youtube.com/watch?v=grE5wjPaItI
You can subscribe to the channel here: https://www.youtube.com/@ExpertsClub
