Why the NBU is downgrading its economic forecasts for 2025: details
17 April 15:45
The National Bank of Ukraine has decided to keep the discount rate at 15.5%, while revising key economic forecasts downward. This was reported by "Komersant Ukrainian" with reference to the National Bank’s statement.
Key changes in the NBU’s forecasts
- Inflation: the forecast for the end of 2025 has been downgraded from 8.4% to 8.7%.
- Economic growth: the GDP forecast has been lowered from 3.6% to 3.1% for 2025.
- International reserves: expected to grow to USD 58 billion in 2025.
Inflationary processes and their dynamics
In March 2025, inflation in Ukraine reached 14.6% year-on-year, which is in line with the expected trajectory of the NBU’s previous macroeconomic forecast. According to the regulator, the price increase is due to several factors:
- The residual effects of last year’s poor harvests.
- Increased prices for excisable goods.
- Increased costs for energy and labor.
- Steady consumer demand.
Despite the overall increase in annual inflation, the monthly dynamics shows signs of easing price pressure, the NBU says.
According to the NBU’s forecasts, in the summer, annualized price growth will begin to slow down, and by the end of the year, inflation will decline to 8.7% (the previous forecast was 8.4%). In 2026, the inflation target of 5% is expected to be reached.
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Economic growth under pressure
The NBU has significantly revised its economic growth forecast for 2025 from 3.6% to 3.1%. The main factors hindering economic recovery are:
- destruction of the gas infrastructure and increased demand for gas imports;
- shortage of skilled workers due to the war;
- aggravation of trade confrontations in the world.
Positive factors that will support the economy include:
- expected increase in harvests;
- reduction of the electricity deficit;
- significant defense orders that support industry.
For 2026-2027, the NBU forecasts economic growth to accelerate to 3.7-3.9% due to increased investment in reconstruction and production recovery.
In 2024, GDP growth was 2.9%.
International financial assistance and reserves
The NBU expects more significant inflows of international financial assistance this year, in particular due to the faster transfer of tranches under the ERA Loans mechanism. This will allow the NBU to
- ensure non-issue financing of the budget deficit;
- create a reserve for public finances for 2026;
- increase Ukraine’s international reserves to USD 58 billion in 2025.
However, the NBU notes that international assistance is likely to decline in the coming years.
Risks to the economy and price stability
The key risk to inflationary dynamics and economic development remains a full-scale war. The main threats, according to the regulator, are as follows:
- Additional budget expenditures to maintain defense capabilities.
- Further damage to infrastructure, especially energy infrastructure.
- Deepening negative migration trends and labor shortages.
Growing geopolitical uncertainty and intensified de-globalization, in particular due to escalating trade conflicts in the world, are also significant challenges.
NBU monetary policy
The NBU’s previous measures to tighten its interest rate policy have yielded positive results, the NBU reports. In particular, the decline in yields on hryvnia instruments has been halted, interest rates on government bonds in the national currency have increased, and rates on time deposits in hryvnia for more than three months have risen.
The NBU also notes that there has been progress in the growth of household deposits for more than three months, and that household demand for foreign currency has decreased.
According to the NBU’s forecast, the key policy rate will remain at 15.5% in the coming months. The NBU will return to the cycle of monetary policy easing only after the peak of the price surge has passed and the risk of inflation reaching double digits has been reduced.
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