Ukraine’s real gross domestic product (GDP) grew by 5.3% in 2023 compared to the previous year, when it fell by 28.8%, according to preliminary data released by the State Statistics Service on Thursday.
According to the data, nominal GDP last year amounted to UAH 6 trillion 537.8 billion, with a change in the deflator of 18.5%.
The State Statistics Service clarified that in the first quarter of 2023, the decline in real GDP compared to the same period last year amounted to 10.3% of GDP, after which it grew by 19.2% in the second quarter, 9.6% in the third and 4.7% in the fourth.
Earlier, in December last year, the statistical agency estimated a 10.5% decline in the first quarter, followed by a 19.5% increase in the second and a 9.3% increase in the third.
Nominal GDP in the fourth quarter amounted to UAH 1 trillion 933.0 billion, compared to UAH 1 trillion 778.4 billion in the third quarter, UAH 1 trillion 463.9 billion in the second quarter and UAH 1 trillion 362.5 billion in the first quarter, according to the State Statistics Service.
As reported, in January, the National Bank of Ukraine estimated the country’s GDP growth in 2023 at 5.7%, and its nominal value at UAH 6.51 trillion. The NBU maintained its GDP growth forecast for 2024 at 3.6% (nominal UAH 7.58 trillion), slightly downgrading it for 2025 from 6.0% to 5.8%. At the same time, for the first quarter of this year, the NBU improved its GDP growth forecast to 7.1% from 5.4%, expecting it to slow to 4.8% in the second quarter.
When approving the draft state budget for the second reading in early November 2023, the government improved its estimate of GDP growth last year from 2.8% to 5%, but downgraded it for 2024 from 5% to 4.6%. According to the Ministry of Economy, GDP growth in January-February this year was 3.6%.
In its updated EFF program with Ukraine, the IMF estimated real GDP growth in 2023 at 5% and nominal GDP at UAH 6.5 trillion. It forecasts a slowdown to 3-4% this year, and an increase in nominal GDP to UAH 7.75 trillion.
For more details on macroeconomic indicators of Ukraine and the world, please see one of the video analyzes of the Experts club think tank – https://youtu.be/w5fF_GYyrIc?si=Ymo-FlMFNGfLLdK-
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Germany’s economy will avoid recession in 2024, but will grow by only 0.1% due to declining exports and weak domestic demand, according to leading German research institutes.
The previous forecast, prepared by the Munich-based Institute for Economic Research (IFO), the Kiel-based Institute for World Economics (IfW), the Rhineland-Westphalian Institute for Economic Research in Essen (RWI) and the Institute for Economic Research in Halle (IWH), predicted German GDP growth of 1.3%.
In 2023, the German economy shrank by 0.3%.
The economists warned that domestic demand is growing more slowly than expected, and exports are suffering due to high electricity prices, which reduce the competitiveness of German energy-intensive goods.
“Cyclical and structural factors are leading to a weakening of economic growth,” said Stefan Koots, head of economic research at the IfW. – “A recovery may begin in the spring, but overall, the growth momentum will not be very strong.
In 2025, according to experts, Germany’s GDP growth will accelerate to 1.4%.
The forecast for inflation for 2024 is 2.3%, for 2025 – 1.8%.
Earlier, Experts Club analytical center released a video analysis of GDP changes in major countries, the video is available at https://youtu.be/w5fF_GYyrIc?si=EpL-_EmhIGfMURGl
In his analytical video published on the Experts Club YouTube channel, Maxim Urakin, founder of the project and PhD in Economics, focuses on the key indicator of global macroeconomics – gross domestic product (GDP), which plays a central role in analyzing the economic well-being of countries. GDP is the total value of all goods and services produced in a country over a certain period of time. This indicator helps to assess how productive a country’s economy is and is an important indicator of its overall economic well-being.
Analyzing GDP dynamics on a global scale
According to Urakin, analyzing the last decades shows significant changes in the global economy.
“In the 1990s to 2000s, first of all, there was significant economic growth in countries such as the US and China, as well as in developing countries such as India. It was a time of economic prosperity for developed countries and a period of rapid growth for some emerging markets,” explained the founder of Experts Club.
But then the world economy was rocked by crises, including the global financial crisis of 2008 and the subsequent European debt crisis. These events, according to Expert Club, slowed global GDP growth and exposed the vulnerability of many economies previously considered promising.
“In recent years, we have faced new challenges, such as the COVID-19 pandemic, which led to a significant downturn in the global economy, and geopolitical tensions, including the war in Ukraine. These events have re-emphasized the interconnectedness and interdependence in the global economy,” said Urakin.
GDP and geopolitical changes
Urakin notes that in the context of geopolitics, GDP serves not only as a measure of economic development but also as an indicator of international influence.
“India, surpassing the UK, has become the fifth largest economy in the world, which emphasizes the shift of global economic forces to the Asian region. This is also confirmed by the fact that China, having overtaken the US in terms of purchasing power, has confirmed its status as a global economic power,” the economist emphasized.
Future trends
Analysis of global GDP dynamics shows that the global economy continues to recover from the pandemic, but geopolitical instability has a restraining effect on this growth. According to Maxim Urakin, it is important to monitor developments and adapt to changing conditions to ensure sustainable economic growth in the future. Ukraine, in this context, needs to focus on strengthening domestic political stability, restoring economic potential and continuing reforms to improve its post-war prospects and strengthen its position on the global stage.
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GDP (Gross Domestic Product) is the total market value of all final goods and services produced in a country over a given period of time (usually a year). It measures a country’s total output and economic activity, being one of the key indicators of its economic health.
Nominal GDP is an estimate of gross domestic product expressed in current market prices, not adjusted for inflation or deflation. This means that when measuring nominal GDP, current prices of goods and services are taken into account, which can lead to higher GDP when prices rise (inflation), even if actual output has not increased.
PPP (Purchasing Power Parity) GDP is a method of estimating GDP that takes into account differences in the cost of living and price level between countries. The PPP GDP calculation uses prices adjusted to reflect real purchasing power in different countries. This allows for a more accurate comparison of living standards and economic activity between countries because it takes into account differences in the cost of goods and services in different places.
Ukraine’s economic growth will continue in 2024 on the back of expanding domestic demand and a further recovery in seaborne exports, but it will fall to 3.9% from around 5.5% last year due to the high base effect created by the past strong agricultural season, international rating agency S&P Global Ratings forecast.
“Absent a significant escalation of the war, we forecast Ukraine’s economy to grow by about 4-5% on average over the medium term, but a recovery to pre-war levels is unlikely in the foreseeable future,” it said in its release on Saturday night as it downgraded Ukraine’s long-term foreign currency rating to ‘CC’ from ‘CCC’ with a negative outlook amid an expected Eurobond restructuring.
S&P estimates that average annual inflation will fall to around 7% this year from 12.8% last year, but it will pick up in the second half of this year amid weakening base effect, recovering domestic demand and moderate currency depreciation.
The agency expects the hryvnia to depreciate to 41.02 UAH/$1 at the end of this year and to 43.89/$1 at the end of next year.
S&P emphasizes that the development of the war with Russia continues to shape Ukraine’s macroeconomic outlook. It is unclear how the war may evolve, but we believe a military stalemate without any major changes on the front lines remains the most likely scenario as both sides resign themselves to a protracted war. The prospect of any negotiated peace plan seems unlikely. As a result, we assume that the active phase of the war will last until the end of this year, and most likely beyond,” the document says.
The agency recalls that Russian troops have occupied about 15% of Ukraine’s territory, which accounts for about 8-9% of its pre-war GDP, 14% of industrial and 10% of agricultural production. Almost a third of Ukraine’s population has been displaced and about 15% have fled the country and are now refugees living mainly in the EU.
Nevertheless, according to S&P’s baseline scenario, the Ukrainian government and the NBU will maintain their administrative capacity even in the face of serious military attacks.
Given the significant damage to physical and human capital, Ukraine’s medium-term economic prospects are subject to a high degree of uncertainty, the agency notes. In its view, the key factors determining the country’s recovery prospects are the evolution of the war, post-war demographics and labor market profile, as well as the effectiveness of reconstruction efforts and continued international support.
S&P notes a high degree of uncertainty about the scope, outcome and consequences of the Russia-Ukraine war. In its view, regardless of the duration of hostilities, the associated risks are likely to persist for some time.
As reported, the National Bank of Ukraine in January estimated the country’s GDP growth in 2023 at 5.7% and maintained its 2024 growth forecast at 3.6%, slightly worsening it for 2025 – from 6.0% to 5.8%.
The government, when approving the draft state budget for the second reading in early November 2023, improved last year’s GDP growth estimate from 2.8% to 5%, but worsened it for 2024 from 5% to 4.6%.
The article collects and analyzes the main macroeconomic indicators of Ukraine. In connection with the entry into force of the Law of Ukraine “On Protection of the Interests of Business Entities during Martial Law or a State of War”, the State Statistics Service of Ukraine suspends the publication of statistical information for the period of martial law, as well as for three months after its termination. The exception is the publication of information on the consumer price index, separate information on statistical indicators for 2021 and for the period January-February 2022. The article analyzes open data from the State Statistics Service, the National Bank, and think tanks.
Demographic indicators of Ukraine
Director of the Ptukha Institute of Demography and Social Studies of the National Academy of Sciences of Ukraine, Academician Ella Libanova, predicts that about 50% of citizens will return to Ukraine after the war ends. At the same time, Libanova believes that if the economy is restored to pre-war levels, Ukraine will not be able to return the projected 4.5 million citizens.
She also drew attention to the fact that, according to Eurostat, there are currently 4.2 million Ukrainian military migrants in the European Union.
Earlier, Libanova described depopulation and labor shortages as an inevitable scenario for Ukraine.
According to the estimates she presented at the Regional Economic Forum, as of the beginning of this year, the population in the government-controlled areas was 31.6 million people, and now it has slightly increased.
Libanova pointed out that the population forecast for the beginning of 2033 within the borders of 1991 Ukraine ranges from 26-35 million people.
Economic recovery
Ukraine’s real gross domestic product (GDP) growth slowed to 8.2% in the third quarter of 2023 compared to the same period last year.
The NBU, which has raised its overall GDP growth forecast for this year to 4.9%, estimates the direct positive contribution of a higher harvest at 1.3 percentage points.
“At the same time, the key risk for our economy remains a longer duration and intensity of the war, as well as a decrease in the volume or loss of rhythm of international assistance, the resumption of a significant electricity shortage due to further destruction of the energy infrastructure and other risks,” said Maksym Urakin.
Analysis of Ukraine’s foreign trade
Maksym Urakin also drew attention to the factor of the growing negative foreign trade balance, which has been observed since the beginning of the war.
“The negative balance of Ukraine’s foreign trade in goods in January-September 2023 increased by 3.2 times compared to the same period in 2022 – $19.402 billion. This means that the cost of purchasing the goods Ukraine needs is almost $20 billion more than the income from exporting Ukrainian goods to other countries,” said Urakin, PhD in Economics.
Ukraine’s financial situation in 2023
According to the expert, the main factors characterizing the state of the Ukrainian economy are public debt, international reserves, and inflation.
“As of September 30, 2023, Ukraine’s public and publicly guaranteed debt amounted to UAH 4,886.13 billion, or USD 133.62 billion. This is a slight decrease compared to the historical maximum set in August,” Maksym Urakin said.
The expert noted that the main risks to the economy remain the duration of the war and the instability of international aid.
“In the third quarter of 2023, Ukraine’s GDP growth slowed to 8.2%. The negative balance of foreign trade increased 3.2 times, which is an alarming signal. The public debt has slightly decreased compared to August figures, but in 2024 it may exceed the country’s GDP for the first time, which poses significant risks to economic stability,” the economist said.
Thus, the economic situation in Ukraine, according to the founder of the Club of Experts, continues to require close monitoring and adaptation of strategies in response to changing conditions. Macroeconomic indicators of Ukraine and the world were discussed in more detail in one of the video programs of the Experts club
Impact of electricity deficit on real GDP vs no deficit, % (forecast up to 2024)
Source: Open4Business.com.ua and experts.news
