Ukraine’s economic growth slowed in February. But there are also more positive assessments
19 March 2025 15:58
In February 2025, Ukraine’s GDP grew by 0.7%, while in January growth was estimated at 1.5%. This was reported by the Ministry of Economy, according to
The Ministry of Economy explained the slightly lower figures for the beginning of the year as a reflection of the uneven growth trends of the past year, while drawing attention to the fact that economic growth is still ahead of the forecast for the 1st quarter.
What contributed to economic growth
According to Oleksiy Sobolev, First Deputy Minister of Economy of Ukraine, the construction and manufacturing industries remain the main drivers of growth.
GDP growth in February 2025 was also driven by a recovery in domestic (retail) trade. Consumer sentiment continued to improve in February, a trend that has been observed for four months in a row.
Business recovery and support programs are contributing to the development of the manufacturing industry, in particular through international financial assistance.
The production of construction materials, machinery, and food products demonstrated positive dynamics.
The defense sector is expanding its production capacity amid an increase in defense orders. The metallurgy sector is also becoming more active, with production of iron, steel, and rolled products increasing.
What explains the slowdown in GDP growth
The decline in economic growth was primarily driven by a drop in the mining industry due to missile attacks on gas production infrastructure and a drop in the performance of the transportation sector due to a temporary decline in export activity.
At the same time, agriculture saw a decline in livestock production due to higher production costs.
Commenting on the economic results of February, First Deputy Minister of Economy of Ukraine Oleksiy Sobolev said: “The slowdown in economic growth in February was due to rocket attacks on gas production facilities and a temporary decrease in exporters’ activity. At the same time, high budget funding for the restoration of damaged critical infrastructure, housing construction under the eRestoration and eHouse programs, as well as purchases of domestic defense products offset these negative factors.”
The Ministry of Economy reminded that in January 2025, GDP growth is estimated at 1.5%. Last year, growth was uneven – 6.5% in the first quarter of 2024 compared to the first quarter of 2023, 3.7% in the second quarter, and 2.0% in the third quarter. The GDP growth forecast included in the 2025 budget is 2.7% for the year.
The NBU explained last year’s economic growth trends and made its forecast for this year
In the fourth quarter of 2024, economic activity in Ukraine recovered at a moderate pace, with real GDP growth estimated at 2.1% yoy. This was stated in the NBU’s January Inflation Report.
An important factor behind the weak economic activity in the second half of 2024 was the electricity shortage caused by the destruction of energy infrastructure, including shunting generation, due to new shelling by Russia. The security situation also deteriorated significantly, especially at the end of the year. The number of air raids and shelling increased significantly, especially in a number of frontline regions, and some production facilities were lost. As a result, business expectations and production activity weakened in a number of industries, including energy, mining, and metallurgy.
According to the NBU’s report, economic growth will accelerate to 3.6% in 2025 and about 4% in the following years. This will be facilitated by investments in rebuilding energy capacities, loose fiscal policy, revival of domestic demand amid rising wages, and increased food production due to higher harvests. However, limited production capacity, weak business expectations, continued migration processes, and a slow normalization of economic conditions will restrain the recovery over the forecast horizon.
The EBRD almost agrees with the NBU in its forecasts
Ukraine’s economy, which grew by 3 percent in 2024 despite the pressure of Russia’s full-scale war, is projected to grow by 3.5 percent in 2025 and strengthen further to 5 percent in 2026, provided an agreement is reached to end the fighting this year. This is stated in the main report of the European Bank for Reconstruction and Development (EBRD).
It is worth noting that the EBRD has lowered its forecast for Ukraine’s growth in 2025 by 1.2 percentage points, while last September it had forecast growth of 4.7% this year.
