Gradual recovery of the Ukrainian economy


Although macroeconomic indicators are a positive signal, Polish entrepreneurs must be aware of the risks associated with the war and the large regional diversity of Ukraine resulting from the conflict.

Forecasts for Ukraine's GDP growth in 2024 indicate moderately high economic development despite the ongoing hostilities. According to estimates by the Ukrainian government and international institutions, Ukraine's economy is expected to grow in the range of 3% to 4.6% in 2024. Meanwhile, in 2023, Ukraine's GDP growth was 5.3%.

These figures signalize that the Ukrainian economy is gradually recovering from a devastating decline of almost 30% in 2022, caused by the Russian invasion. While the observed trend is positive, this is partly for the reason of a low comparative basis. Ukraine's GDP remains 20% lower than before the outbreak of the war.

In addition, it should be expected that a further escalation of the conflict, especially massive Russian attacks on energy infrastructure, may have a negative impact on the Ukrainian economy in the coming months. The needs related to the mobilization of young men may also have a significant negative impact on economic activity.

Economic growth will be driven by the adaptation of the economy to war conditions, stabilization of the currency market and reconstruction of infrastructure. Key sectors with a positive impact on stimulating the economy are agriculture and defense manufacturing industry.

The World Bank forecasts a budget deficit of around 16% in 2024, which indicates Ukraine's huge dependence on foreign aid not only to maintain its defense potential, but also macroeconomic stability. At the same time, inflation in Ukraine is estimated to reach several percents in 2024.

Although economic growth indicators are a positive signal, Polish business should approach investments in Ukraine with caution, considering the instability of the war situation. Trade with Ukraine should be considered the safest, especially with products with high added value, such as machine components, electronic devices, and food products. Trade involves lower geopolitical risk compared to direct investment, and demand for this type of goods in Ukraine is high, due to the need to rebuild infrastructure and industry.

Services that support the processes of reconstruction and modernization of Ukraine may also be an important element of Polish business activity. 

Before making investment decisions in Ukraine, Polish companies are advised to analyze thoroughly the risks, as well as to avoid regions that are more vulnerable to Russian missile attacks.

Western Ukraine remains the area least exposed to the risks resulting from hostilities. This is confirmed by statistical data. The western regions of Ukrainian regions experienced the smallest decline in 2022, as well as the strongest rebound. GDP growth in 2023 reached an average of over 8% there.