Ukrainian Economy in 2024: Special Edition of the Tracker

How did the Ukrainian economy fare in 2024? The key insights on Ukraine’s economy in 2024 – in this special edition of the Ukraine War Economy Tracker, featuring interactive charts and expert commentary. Traditional Tracker, which we update regularly, is available via the link. The project is supported by PrivatBank.

Economic Recovery Slowed: GDP Grew by 2.9% in 2024

Despite a nearly 4% year-on-year GDP increase, Ukraine’s economy has yet to fully recover from the sharp decline at the start of the full-scale invasion. After contracting by 28.8% in 2022, GDP rebounded by 5.3% in 2023, but growth slowed in 2024. Each quarter of 2024 saw weaker GDP expansion compared to 2021 than in the previous year.

Security risks, a shortage of skilled workers, and the impact of Russian strikes on energy infrastructure continue to hinder recovery. In 2023, the rebound was partly driven by a low comparison base from 2022 and a surge in government spending, which in 2024 became more of a wartime norm than an exceptional stimulus.

Ukraine faces a long road to economic recovery, which will take years. If the GDP growth rates projected by the National Bank of Ukraine hold, the economy will not return to 2021 levels before 2030. Accelerating growth must remain a key policy priority, especially to advance Ukraine’s path to EU membership.

Inflation Accelerated for the First Time Since Autumn 2022

Inflation in Ukraine began accelerating for the first time since autumn 2022, hitting 12% in December 2024, compared to 5.1% year-on-year at the end of 2023. Key drivers of price increases included a dry summer and weak harvest, rising energy and fuel costs, and higher labour expenses.

In the first half of 2024, prices for eggs, oil, vegetables, and sugar were mostly lower than in 2023. However, by the end of the year, prices had risen across all categories.

The biggest price drops in the first six months were seen in meat, eggs, oil, sugar, and salt. Yet, in November, egg prices surged sharply, increasing by more than 1.5 times.

The NBU Raised the Key Interest Rate for the First Time in Over 2.5 Years to Curb Inflation

In response to rising inflation, the NBU raised the key interest rate to 13.5% at the end of 2024. The goal was to stabilise the currency market, lower inflation expectations, and gradually slow inflation to the target level of 5%—the optimal rate for maintaining price stability and creating favourable conditions for economic growth.

A higher key interest rate makes loans more expensive, making it harder for businesses and individuals to borrow money. At the same time, banks may raise deposit interest rates, encouraging people to save rather than spend. Lower consumption reduces demand for goods and services, helping to slow price growth. However, this process depends on many factors, including the state of the economy, market competition, and external influences.

Government Bonds Remained the Best Hryvnia Investment Instrument

Domestic government bonds (OVDPs) are a tool the Ukrainian government uses to finance expenditures not covered by tax revenues or foreign funding. By purchasing OVDPs, investors not only earn higher returns than bank deposits but also directly support the state during wartime. The government guarantees repayment, as these bonds are part of the domestic debt.

Since inflation was at its lowest in the first half of 2024, the real return on OVDPs was at its highest during this period. However, even after inflation accelerated, OVDPs remained an attractive investment option, offering higher returns than deposits.

Exchange Rate Surpassed 42 UAH/$ by Year-End

At the start of 2024, the official and cash exchange rates stood at 38 UAH/$. By the end of the year, both had surpassed 42 UAH/$, marking a 9.5% depreciation of the hryvnia. Given the war and budget deficit, this level of devaluation can be considered relatively moderate.

After the NBU abandoned the fixed exchange rate in 2023 and switched to a flexible exchange rate regime, the hryvnia continued to gradually depreciate. A weaker national currency negatively affects domestic consumers of imported goods by driving up prices. However, devaluation boosts the competitiveness of Ukrainian exports, making domestic goods cheaper and more attractive on global markets.

NBU Sold Nearly $35 bn in FX Interventions to Stabilise the Exchange Rate

Foreign exchange interventions are one of the key tools the National Bank of Ukraine (NBU) uses to influence the hryvnia exchange rate and regulate liquidity in the economy. The primary goal of such interventions is to ensure price stability, which is a core function of the NBU.

By the end of 2024, Ukraine sold more foreign currency than it purchased, leading to a negative balance of $34.8 bn. This indicates that demand for foreign currency exceeded supply, forcing the NBU to use its reserves to support the hryvnia. Compared to 2023, the negative balance grew by 21.7%, and compared to 2022, it increased by nearly 40%.

In December 2024, foreign currency sales hit a record $5.3 bn, surpassing previous crisis peaks. In March 2020, during the COVID-19 pandemic, the NBU sold $2.4 bn, while in October 2014, amid Russian aggression in eastern Ukraine and following the first Minsk agreements in September, sales reached $3.2 bn.

The main driver of record-high currency sales in December was record-high monthly state budget expenditures, which totaled 492 bn UAH. A large share of these funds was allocated to purchasing weapons and ammunition, increasing import demand and, consequently, the need for foreign currency.

Foreign Exchange Reserves Continued to Grow

In 2024, international reserves grew by an average of 7.7%, significantly less than in 2023, when they increased by 41.5%. However, the positive trend remained in place.

The growth in reserves was driven by substantial inflows from international partners, which exceeded the volume of foreign currency sales by the NBU and government debt repayments. Despite large-scale forex interventions, reserves continued to increase.

One in Seven Ukrainians Remained Unemployed

By the end of 2024, the average unemployment rate fell to 14.3%, down from 17.4% in 2023 and 18.5% in 2022.

The labour market remained imbalanced. While there were many job vacancies, unemployment remained high, indicating the presence of structural unemployment. Labour shortages became a major challenge for businesses.

The workforce deficit intensified competition among employers, driving real wage growth, even compared to the pre-war period. Companies increasingly hired women, students, and older workers for roles traditionally dominated by men. Women took up positions as truck drivers, welders, technicians, public transport operators etc. This shift was supported by state and international training programmes, helping women acquire new skills.

However, retraining takes time, and the labour force continues to shrink due to mobilisation and emigration. As a result, labour market imbalances will persist in the coming years.

Tax Revenues Increased

A more detailed analysis of Ukraine’s 2024 budget will be available soon in our Budget Review 2024.

By the end of the year, tax revenues grew by 37% compared to the previous year, reaching 1,647 bn UAH. All major taxes outpaced inflation, with the largest increases in absolute terms coming from corporate profit tax (+127 bn UAH), excise duties (+106 bn UAH), and VAT on imports (+100 bn UAH).

In real terms (adjusted to October 2021 prices), tax revenues returned to pre-war levels for the first time in 2024.

Late in the year, Ukraine introduced a historic tax increase, driven by concerns that the budget would lack sufficient funds for defence spending.

The primary focus was on raising the military levy, increasing the tax burden on officially employed citizens and legitimate businesses, while leaving the shadow economy largely untouched. As a result, the financial burden was distributed unevenly, putting additional pressure on compliant taxpayers.

A more balanced approach would have been raising VAT, which would have spread the tax burden across the entire economy, rather than concentrating it on the formal sector.

Defence Remained the Top Priority in Government Spending

A more detailed analysis of Ukraine’s 2024 budget will be available soon in our Budget Review 2024.

In 2024, government expenditures (excluding in-kind military aid recorded in the state budget) reached 3,822 bn UAH, an increase of nearly 16% compared to 2023.

Spending on defence and security totalled 2,261 bn UAH, with December’s expenses exceeding the previous record set in November by more than 130 bn UAH.

Debt servicing costs amounted to 307 bn UAH, making up 8% of total budget expenditures (excluding military aid).

In 2024, Ukraine allocated a record 30% of its GDP to defence, the highest share of any country in the world. Even Russia, based on available data, spent a smaller proportion of its GDP on defence.

Given that Ukraine’s economic potential is significantly lower than Russia’s, maintaining military parity—securing weapons, equipment, and essential supplies—requires Ukraine to dedicate a much larger share of its GDP to defence.

Among NATO countries, the highest defence spending as a percentage of GDP was recorded in Poland (4.1%), Estonia (3.4%), Latvia (3.2%), Lithuania (2.9%), and Greece (3%). Meanwhile, eight NATO members, including Italy, Canada, and Spain, have yet to meet the 2% minimum threshold.

Foreign Financial Aid Remained a Pillar of the Budget and Economy

Ukraine navigated 2024 with sufficient external financing, which helped maintain economic stability. Thanks to support from international partners and efforts to utilise frozen Russian assets, the country entered 2025 in a stronger financial position than in previous years. In total, Ukraine received $41.6 bn in external budgetary support in 2024.

This year also marked a turning point in Ukraine’s financing, as funds from the revenues of frozen Russian assets began to be used for the first time. In June, G7 leaders agreed to provide Ukraine with a $50 bn loan through the ERA (Extraordinary Revenue Acceleration Loans for Ukraine) mechanism, which will be repaid using future proceeds from frozen Russian assets.

At the same time, Ukraine may not have to repay this $50 bn loan to G7 countries if it does not receive war reparations from Russia. The first ERA-linked disbursement came in 2024 from the United States.

In the first two months of 2024, external assistance was insufficient, primarily due to delays in US aid approval by Congress. However, by the end of the year, foreign aid met expected levels, covering three-quarters of the state budget’s additional needs—the highest coverage in three years of war.

Agriculture Accounted for 43% of Goods Exports in 2024

In 2024, Ukraine’s goods exports increased by 15%, reaching nearly $42 bn. Agricultural products remained the core of exports, accounting for 43% of total volume ($18.1 bn). The top export commodities were corn and sunflower oil ($5.1 bn each), wheat ($3.7 bn), and rapeseed ($1.9 bn).

The metallurgical sector contributed 15.2% of export revenues ($6.4 bn), with iron ore ($2.8 bn) and steel ($2.4 bn) remaining key export products.

In 2024, Ukraine’s grain and oilseed exports increased by 20%, reaching 61.5 million tonnes. The Black Sea ports, which operated stably, handled 79% of total exports.

Despite regular Russian attacks and logistical risks, Ukraine not only maintained but also expanded grain exports abroad.

IT Services Retained the Largest Share of Service Exports but Declined in Volume

In 2024, Ukraine’s service exports increased by 3.8%, reaching $17.2 bn. However, computer services declined by 4.2% to $6.4 bn, while transport services grew by 7.7% to $4.1 bn.

The professional services and management consulting sector expanded by nearly 15%, while technical and trade services grew by 11%.

Goods Imports Remained Significantly Higher Than Exports

In 2024, Ukraine’s goods imports totaled nearly $71 bn, an 11% increase from the previous year. The majority of imports consisted of electronics, automotive equipment, and technical devices, accounting for about one-third of total imports. Chemical products and pharmaceuticals made up 17%, while oil, gas, and electricity imports amounted to $8.2 bn (11.5% of total imports).

Ukraine’s imports were largely high-tech products, whereas exports remained dominated by lower-value-added goods with less processing.

Service Imports Declined for the Second Consecutive Year, but Ukrainians’ Spending Abroad Remained High

Service imports continued to shrink, falling by 10% in 2024, following an 8.5% decline in 2023.

Travel services remained the largest category, accounting for over 60% of total service imports ($14.2 bn). This includes spending by Ukrainians abroad, particularly refugees, made through Ukrainian payment cards. However, this segment declined by 17.2% in 2024. Meanwhile, transport service imports grew by 12.9%.

The strongest growth was recorded in professional services and management consulting, which more than doubled (+104.2%). Technical and trade services also expanded significantly (+63.2%), while computer service imports rose by 24.7%.

The EU Remained Ukraine’s Largest Trading Partner

For the first time since the start of the full-scale invasion, Ukraine’s exports grew year-on-year. The overall structure of trade partners remained largely unchanged, with Poland remaining the largest importer of Ukrainian goods.

The biggest export decline was recorded in trade with Romania, where exports dropped by $2 bn in 2024. Meanwhile, exports to Spain and Germany increased significantly (+$1.7 bn combined), as well as to the Netherlands, Belgium, and Italy (+$1.4 bn). Ukraine also saw notable export growth to Egypt, India, Indonesia, and the US (+$1.7 bn).

As a result of these shifts, for the first time since the full-scale war began, the share of exports to Europe decreased, while exports to other regions of the world expanded.

The European Union remained Ukraine’s largest trading partner by import volume. However, at the country level, China was Ukraine’s top source of imported goods.

For the first time in 2024, the annual increase in imports from China ($3.92 bn) outpaced the total growth in imports from all European countries combined ($2.96 bn).

A Year of Worsening Expectations

According to NBU surveys, the average annual business expectations index fell across most sectors—including trade, industry, and services—compared to 2023.

The only sector where expectations improved was construction, likely due to large-scale government projects for rebuilding damaged buildings and infrastructure, creating favourable conditions for industry growth.

In 2024, Ukrainians lost the optimism that had emerged at the start of the full-scale war and began to view the situation more realistically. The average annual consumer sentiment index fell to its lowest level in three years.

Despite rising real incomes, inflationary pressure and overall socio-economic uncertainty deepened pessimism about the future.