The NBU revises its economic forecast and publishes it in the Inflation Report on a quarterly basis. The Inflation Report contains a lot of useful information, but it is primarily intended for professionals. This page was created to make it easy for everyone to learn about major economic events and how the NBU sees the development of the Ukrainian economy going forward.
The updated NBU forecast is based on the assumption
How is the economy holding up?
The Ukrainian economy is recovering faster than the NBU expected. This has been facilitated by the absence of power outages, as well as by the further rerouting of supply chains, including through the western borders. As a result, various types of economic activity have been reviving, such as metallurgy, livestock farming, and the food industry. Domestic demand has also been more upbeat than the NBU projected. Ukrainians have begun to spend more on goods and services. This has, among other things, been driven by the improvement in consumer sentiment amid the economic recovery and a certain uptick in the financial standing of households. Significant budget expenditures are also playing an important role. Thanks to large amounts of international aid, the government can finance social expenditures and the reconstruction of damaged infrastructure while using tax revenues to support the Armed Forces.
In view of the better-than-expected situation in H1 2023, the NBU has revised its forecast for real GDP
What about the prices?
Inflation
The NBU is projecting that inflation will ease further to 8.5% in 2024 and to 6.0% in 2025. A number of factors will contribute to this. First, a gradual decrease is expected to occur in global prices, in particular for energy
What will happen to jobs and wages?
The unemployment rate
However, the recovery of the economy is nonetheless contributing to the gradual revival of the labor market. Businesses are increasingly competing for workers and raising wages. This is evidenced by both tax data and job search sites data. According to surveys, companies themselves are also expecting further growth in expenses on the compensation of employees. The NBU is also projecting a gradual reduction in unemployment and an increase in wages in 2023–2025 in both nominal and real terms. The post-war rebuilding of Ukraine will create conditions for sustainable growth in employment and incomes.
How are interest rates on deposits and loans changing?
Ukrainian banks have been actively raising their deposit rates in spring and summer of this year. In many financial institutions, 3–12-month hryvnia deposits now come with interest rates of 15% and higher. Such a yield safeguards savings from losing its value due to inflation. It therefore is no surprise that in recent months, Ukrainians have been actively making deposits denominated in the domestic currency. Meanwhile, the demand for FX deposits has declined.
All of this has been made possible by the NBU’s consistent policy. Specifically, the increase in the key policy rate
Of course, interest rates on loans to businesses and households also remain high. This is primarily due to significant inflation and wartime risks. Loan rates are expected to decrease in the years ahead because of an expected easing of security risks and a further pullback in inflation.
Subscribe to news alerts