Ukraine’s real gross domestic product (GDP) grew by 1.4% in December 2024 compared to December 2023, and by 3.2% for the whole of 2024, but its growth to 3.7% is not excluded, depending on the contribution of the public sector, according to experts of the Institute for Economic Research and Policy Consulting (IER).
“Russian shelling of industrial and energy infrastructure and the offensive of Russian forces at the frontline had a negative impact on the industrial development indicators in December. According to IER estimates, electricity production decreased by 5.2% in December (compared to December 2023 – IF-U),” the IER states in the Monthly Economic Monitoring.
At the same time, real gross value added (GVA) in the extractive industry probably remained close to the previous year’s figure due to higher production of natural gas and iron ore, which continued to offset the decline in coal production.
It is noted that stable demand and logistical export opportunities contributed to the development of metallurgy (in particular, exports of finished metallurgical products continued to grow).
The machine building industry grew due to defense procurement and export growth. As a result, according to the IER, real GVA in manufacturing increased by 4.2% in December compared to December 2023.
Due to higher budget expenditures, the growth rate of GVA in construction grew faster in the fourth quarter than in the third.
As for GVA in livestock, it is declining. This applies to milk production, the number of cattle, etc. Corn harvesting continued, but at a slower pace. According to IER estimates, real GVA in agriculture declined by 3.7% yoy in December.
At the same time, central fiscal expenditures in December were record high, although complete data on the state budget are not yet available.
“Therefore, we may not have fully taken into account the impact of government spending on the performance of the public sector and the sectors of the economy that received additional funds from the budget. This may mean that our estimate of real GDP in December may be too pessimistic,” the IER said.
The Institute also added that for a more accurate assessment of the results for 2024, there is a lack of updated quarterly GDP structure for 2023, as the State Statistics Service has revised the annual figures quite significantly.
Speaking about the results of December, the IER notes that Ukraine has increased electricity imports by 2.6 times compared to December last year – to more than 430 thousand MWh.
In addition, as of January 1, 2025, the transit of Russian gas to Europe was terminated due to the expiration of the Agreement on Cooperation between the Ukrainian GTS Operator LLC and Gazprom.
In 2024, Ukraine’s seaports handled 97.2 million tons of cargo (+57% compared to the previous year), Ukrzaliznytsia transported 174.9 million tons of cargo in 2024 (+18%), and exports by road amounted to more than 10 million tons (+5%).
In December 2024, exports fell due to a decrease in stocks of agricultural products, while imports of machinery and equipment exceeded pre-war levels in dollar terms.
“In December, inflation accelerated once again in annual terms, this time to 12% compared to December 2023. The price increase in 2024 primarily reflected higher costs for producers and retailers, a poorer harvest this year, and likely some recovery in trade margins amid recovering consumer demand. The most significant increase was in food prices,” the IER emphasizes.
It is expected that in 2025, the largest funding will come from the ERA mechanism, which provides a total of $50 billion in assistance from the G7. Part of this aid will be used for military spending, so funding for non-defense needs will be lower.
