Ukraine’s gross domestic product (GDP) growth will slow to 3.2% in 2024, reflecting lower harvests and persistent labor shortages, the World Bank forecast in the Europe and Central Asia Economic Outlook released on Thursday.

“The country’s economic prospects remain conditioned by donor support and the duration of the Russian invasion. According to the latest estimates of the World Bank and partner organizations, the cost of recovery in Ukraine has increased to $486 billion, which is more than twice the size of Ukraine’s pre-war economy in 2021,” the document states .

The WB also confirmed the forecast for the growth of Ukraine’s economy for 2025 – 6.5%, clarifying that the indicative scenario assumes that active military operations will continue throughout 2024.

“Macroeconomic risks arising from ongoing active hostilities and uncertainty over the timing and volume of foreign aid continue to rise and may require policy adjustments if downside risks materialize,” the bank noted.

He added that household incomes have increased with this economic growth, but household sentiment remains bleak, while most people report worse financial conditions compared to their pre-war situation.

The WB notes that Ukraine’s economy continues to function as a military economy, spending nearly 50% of its 2023 budget on defense, while private demand continues to be restrained by tight monetary policy designed to curb inflationary pressures stemming from supply disruptions. , and high public sector demand, while the public sector absorbs scarce domestic resources and external aid to finance its large deficit.

“Since the war has been going on for the third year, Ukraine’s economic management has reached a turning point,” the bank believes, noting that fears about the timing and volume of future aid payments are growing.

The SB reminds that after $42.5 billion in 2023, the budget of Ukraine for 2024 plans to receive $37.3 billion in external financing, the timely receipt of which will be crucial for the authorities to be able to maintain macroeconomic stability and finance critical expenditures, in particular for social assistance.

In the bank’s view, the key priorities are to restore livelihoods by integrating displaced populations and veterans into labor markets, ensuring the continuity of social services and supporting households to recover from property damage.

The WB also forecasts an increase in inflation in 2024 to 9.5% from 5.1% last year as the impact of one-off factors diminishes.

The current account deficit is expected to widen to 7.8% of GDP this year from 5.4% of GDP last year, public debt to rise from 86.8% of GDP to 96.3% of GDP, and net foreign direct investment to fall to 0.8% GDP with 2.4% of GDP.

“It is predicted that the state and state-guaranteed debt will stabilize at the level of about 98% of GDP in the medium term. This scenario is exposed to significant risks of worsening the situation due to the vulnerability of Ukraine’s economic trajectory to the deficit of external financing and the possible continuation of active hostilities after 2024,” he noted.