The European Commission has downgraded Ukraine’s GDP growth forecast for 2025

The European Commission has downgraded Ukraine’s GDP growth forecast for this year to 2%, down from 2.8%projected in November. The forecast for next year has also been revised downward—from 5.9% to 4.7%.

The updated forecast was published today.

Overall, the Commission expects a further slowdown in economic activity to 2.0% in 2025.

“The war continues to exert significant pressure on Ukraine’s production capacity and business sentiment. Exports will decline, reflecting a drop in industrial output, especially in energy-intensive sectors affected by high energy prices, as well as in the metallurgical industry,” the report states.

Agricultural exports are also expected to fall due to reduced reserves following a poor 2024 harvest, caused by unfavorable weather for farmers.

In addition, due to the sharp rise in energy and labor costs, inflation is projected to rise to 12.6% in 2025, before easing in 2026 as supply-side pressures diminish.

At the same time, from 2026 onward, stronger economic growth is expected, which will contribute to improved revenue collection. A gradual shift in spending from military needs to recovery and reconstruction will significantly reduce the budget deficit.

As a reminder, in April, the World Bank, in its updated macroeconomic forecast for Europe and Central Asia, confirmed its January projection that Ukraine’s GDP growth would slow from 2.9% last year to 2% in 2024, and downgraded its 2025 forecast from 7% to 5.2%.