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1.0 Executive summary
Ukraine's GDP grew by 3.7% in May and by 4.3% in the first five months of 2024, according to the Ministry of Economy. This growth is bolstered by high export rates, the stable operation of the Ukrainian maritime corridor, and robust demand for construction services driven by infrastructure restoration efforts. Positive trends have been observed across the transport industry, construction, agriculture, and internal trade.
In May, industrial enterprises continued to restore economic activity, driven by export-oriented production and increased demand for investment products in mechanical engineering and construction materials. The metallurgical industry, in particular, reached its highest production rate since the onset of the war, although it still falls short of pre-war levels.
Despite these gains, logistical problems and a challenging labour market, exacerbated by migration, remain significant economic hurdles. The Center for Economic Strategy (CES) forecasts Ukraine's economy to grow by 3-4% by the end of 2024, a slowdown compared to 2023. Experts attribute this cautious outlook to the severe damage inflicted on Ukraine's energy infrastructure by Russian attacks.
Inflation in Ukraine is falling, with expectations of 7.5% according to the average forecast, and over 9% at the highest estimate. This is an improvement from December's peak inflation rate of 13%. However, financing the budget remains a critical issue. Ukraine's state budget needs are projected at $53 billion, while the IMF forecasts $43 billion, leaving an estimated $17 billion gap between budgetary needs and international support.
In May, the European Union adopted the Ukraine Plan, which is essential for implementing the €50 billion Ukraine Facility programme. This plan outlines 69 reforms across 15 areas and 10 investments, broken down into 146 qualitative and quantitative indicators. The Ministry of Economy is collaborating with the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) to secure funds for the rapid restoration of the energy sector.
The ongoing conflict has severely impacted Ukraine's energy sector, with significant damage leading to rolling blackouts. Since the beginning of the war, Russia has destroyed over 60% of Ukraine's electricity production capacity, reducing generation from 55 GW to 20 GW. The upcoming winter poses significant challenges, with the country bracing for potential cold and dark conditions.
The resilience of Ukraine's economy amid these adversities highlights the country's robust recovery efforts and the critical role of international support in addressing ongoing economic and infrastructural challenges.
2.0 Politics
2.1 Ukraine launches the Reform Matrix
The Cabinet of Ministers of Ukraine has introduced the Reform Matrix, a new
6 UKRAINE Country Report July 2024 www.intellinews.com