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Economic Overview

On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

Nearly two years into the conflict, Russia's invasion of Ukraine stands as a tragic event with profound human and economic consequences. The invasion has inflicted staggering losses on both the people and the economy of Ukraine, erasing 15 years of development gains and exacerbating poverty. After contracting by nearly 30% in 2022, Ukraine's economy experienced a modest rebound last year, registering a growth of 2% (IMF, 3.5% according to the World Bank). The recovery can be attributed to sustained donor support, a more stable electricity supply, heightened government spending, improved agricultural yields, and the redirection of certain exports through Ukraine's western borders. The economic forecast for Ukraine anticipates growth rates of 3.2% in 2024 and a robust 6.5% in 2025 (IMF), with private consumption and public investments as key drivers. However, GDP would still be 20% below its pre-war levels and the overall economic outlook remains contingent on factors such as the progress of the ongoing war, the influx of foreign funds, and the evolution of export patterns.

Following an increase in 2023 (20.5% of GDP according to the EU Commission estimates), the general government deficit is expected to stay elevated in 2024 (19.7%). This is attributed to substantial expenditures associated with the ongoing war effort on the expenditure side, coupled with weak revenue growth stemming from a modest increase in GDP. In 2025, a reduction in total expenditure, particularly in war-related expenses, is anticipated, contributing to a partial narrowing of the fiscal deficit (to 12% of GDP). in March 2023, Ukraine secured a 48-month Extended Fund Facility (EFF) arrangement, granting access to USD 15.6 billion. This arrangement is integral to a larger USD 122 billion support package for Ukraine. The IMF-supported program, endorsed by the authorities, is designed to establish policies that uphold fiscal, external, price, and financial stability amid the heightened uncertainty resulting from the ongoing war. The debt-to-GDP ratio has been increasing steadily since the start of the invasion, reaching 88.2% in 2023, and is projected to surpass 100% by 2025. A tight monetary policy, falling food prices, and rapid repairs of the energy infrastructure contributed to a reduction in inflation, which was estimated at 17.7% last year. Assuming a continuation of easing supply constraints and a slowdown in global prices, inflation should further decrease throughout the forecast horizon (to 8.6% by 2025).

The labour market has shown signs of stabilization in 2023, driven by reduced net migration outflows and the partial return of internally displaced persons. However, the persistently high number of displaced individuals, both abroad and within Ukraine, will continue to exert pressure on the labour market, causing imbalances across regions and sectors. Despite anticipated economic growth, the unemployment rate – at 19.4% in 2023 - is projected to stay elevated, albeit on a declining trend. Concurrently, regional and sectoral labour shortages, coupled with an expected decrease in inflation, are likely to contribute to a recovery in real wages, especially in 2025.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 160.50173.41186.26196.05206.63
GDP (Constant Prices, Annual % Change) -29.12.03.26.55.0
GDP per Capita (USD) 4,6075,2255,5315,6525,901
General Government Balance (in % of GDP) -15.00.00.00.00.0
General Government Gross Debt (in % of GDP) 78.588.298.6100.799.5
Inflation Rate (%) n/a17.713.08.66.7
Unemployment Rate (% of the Labour Force) 24.519.410.69.28.7
Current Account (billions USD) 8.01-9.87-13.34-13.92-12.68
Current Account (in % of GDP) 5.0-5.7-7.2-7.1-6.1

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector plays a major role in the Ukrainian economy. In 2022, it contributed to 8.2% of the GDP and employed 15% of the working population (World Bank). The country stands as a leading global agricultural producer and exporter, holding a vital position in providing oilseeds and grains to the international market. With over 55% of its land designated as arable, Ukraine predominantly relies on agricultural products as its key exports. The main crops are cereals, sugar, meat and milk. Ukraine is the world's fifth-largest exporter of grain. Furthermore, the country is rich in mineral resources, mainly iron and magnesium, as well as in energy resources (coal and gas). However, the agriculture sector in Ukraine has suffered significant damage due to Russia's invasion, leading to a reduction in export capacity, the destruction of infrastructure and farmland, and a rise in fuel and input expenses.

The secondary sector employs almost a quarter of the active population and accounts for 19.2% of the GDP (World Bank). The Ukrainian manufacturing sector is dominated by heavy industries such as iron (Ukraine is the world's seventh-largest producer of iron) and steel. These two sectors alone account for around 30% of the industrial production; however, steel production is below its pre-2008 level. Coal mining, chemicals, mechanical products (aircraft, turbines, locomotives and tractors) and shipbuilding are also important sectors. Industrial production in Ukraine in January-June 2023 decreased by 2.9% compared to the same period in 2022 (when it decreased by 31.9% following Russia’s invasion). The iron and steel sector has experienced one of the steepest declines in production, with steel production dropping by 31.4% in the first half of the year.

The service sector employs 61% of the workforce and contributes to 60.8% of the GDP (World Bank). Ukraine is a country of energy transit, historically transporting Russian and Caspian oil and gas to Western Europe and the Balkans, through its territory. Nevertheless, in the context of tensions with Russia, Ukraine’s role as the main transit corridor has diminished, with Russia seeking alternative routes. Ukraine's banking sector exhibits a relatively modest asset-to-GDP ratio of 40%. While the top-5 banks show a moderate level of concentration, the sector displays a significant degree of state ownership, constituting 50% of net assets. Despite these dynamics, Ukraine's banking sector remained remarkably resilient even after the start of the war and serves as a crucial pillar supporting the real economy. After suffering from the impact of the COVID-19 pandemic, Ukrainian economic sectors were further hit by the consequences of Russia’s invasion. The massive infrastructure and facilities destructions, as well as mobilisation, disrupted activity.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 14.7 24.5 60.9
Value Added (in % of GDP) 8.2 19.2 60.8
Value Added (Annual % Change) -28.4 -43.2 -23.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Ukrainian Hryvnia (UAH) - Average Annual Exchange Rate For 1 USD 25.5526.6027.2025.8026.96

Source: World Bank - Latest available data.

 

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Foreign Trade

Ukraine is a very open economy, with a share of foreign trade in the country's GDP of 88% in 2022 (World Bank). Ukraine is the world's fifth-largest exporter of grains and one of the main exporters of iron and steel. In 2022, the main exported products were maze and corn (13.5%), sunflower (12.4% - the country being the n.1 exporter worldwide), iron ores (6.6%), and wheat and meslin (6%); whereas imports were led by petroleum oils (15.7%), vehicles (5.3%), petroleum gas (3.8%), medicaments (2.8%), and coal (2.1% - data Comtrade).

Foreign trade has been hardly hit by the conflict with Russia, which has traditionally been a major supplier of oil and gas, accounting for almost a quarter of the country's total imports. Ukraine is seeking to develop its trade relations with the member states of the European Union, with a view to emancipating from Russia. The EU and Ukraine have provisionally applied their Deep and Comprehensive Free Trade Agreement (CCFTA) since January 2016. Furthermore, prior to the war, maritime transport had served as the primary export route for Ukrainian commodities, accounting for both value and volume. However, with the onset of the war, there was a shift, and road and rail transport saw increased importance, therefore Ukraine's land border crossings with EU countries, predominantly Poland, emerged as the primary routes for Ukrainian exports. In 2022, China accounted for 15.7% of Ukraine's imports, followed by Poland (9.9%), Germany (8.3%), Turkey (6.1%), and the United States (3.9%). Ukraine's main customers were Poland (15.1%), Romania (8.8%), Turkey (6.6%), Hungary and Germany (5.1% each - data Comtrade).

According to WTO data, Ukraine exported USD 44.3 billion and imported USD 55.2 billion worth of goods in 2022 (-34.1% and -24.1%, respectively); whereas exports of services declined by 12.4% to USD 16.16 billion and imports almost doubled to USD 27.1 billion. Therefore, the deficit of the external balance on goods and services widened to 16.8% of GDP in 2022, from 1.3% one year earlier (World Bank). The latest governmental estimates show that, in 2023, the value of exports fell by 18.7% y-o-y (to USD 35.8 billion). In contrast, imports in monetary terms increased to USD 62.2 billion.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 60,80054,33772,84355,29463,527
Exports of Goods (million USD) 50,05449,19268,07344,13436,040
Imports of Services (million USD) 15,71511,16414,42027,70325,189
Exports of Services (million USD) 17,46515,56418,39116,61816,401

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 99.290.579.282.787.7
Trade Balance (million USD) -12,714-14,261-6,778-6,642-14,652
Trade Balance (Including Service) (million USD) -11,378-12,511-2,378-2,671-25,662
Imports of Goods and Services (Annual % Change) 2.85.7-6.414.2-18.5
Exports of Goods and Services (Annual % Change) -1.47.3-5.8-8.6-42.4
Imports of Goods and Services (in % of GDP) 54.049.340.342.052.3
Exports of Goods and Services (in % of GDP) 45.241.238.840.735.5

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -13.710.94.311.211.5
Volume of imports of goods and services (Annual % change) 15.49.612.012.48.5

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Ukraine is a member of the following international economic organisations: Organization for Democracy and Economic Development (GUAM), IMF, Black Sea Economic Cooperation Zone (BSEC), WTO, Eurasian Economic Community (EAEC) (observer), among others. For the full list of economic and other international organisations in which participates Ukraine click here. International organisation membership of Ukraine is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Ukraine can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)
2022
Poland 15.1%
Romania 8.8%
Türkiye 6.6%
China 5.6%
Hungary 5.1%
See More Countries 58.8%
Main Suppliers
(% of Imports)
2022
China 15.7%
Poland 9.9%
Germany 8.3%
Türkiye 6.1%
United States 3.9%
See More Countries 56.1%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Volodymyr Zelensky (since 20 May 2019)
Prime Minister: Denys Shmyhal (since 4 March 2020)
Next Election Dates
Presidential: 31 March 2024 although the Ukrainian government has enacted martial law, and Ukrainian law does not allow elections to be held when martial law is in effect
Supreme Council: the electoral procedure ought to occur within a month after lifting the state of martial law, which was implemented in 2022 in response to the Russian invasion
Current Political Context
On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

Since he was elected President in April 2019, former actor and television producer Volodymyr Zelensky promised to prioritise two issues highlighted during his campaign, corruption and the conflict in eastern Ukraine (Donbass). The absolute majority obtained at the legislative elections of July 2019 allowed him to launch a reform program but with many challenges, as illustrated by the political crisis that emerged in October 2020. A controversial ruling by the Ukrainian Constitutional Court cancelled key anti-corruption legislation, notably the requirement for government officials to file e-declarations of their assets. This led Ukraine's main donors, including the IMF, to suspend their funding. However, in 2022, internal divisions were put aside and as Ukraine was united around the political and military goals to restore its territorial integrity and the legally recognised borders of 1991, Zelensky enjoyed broad popular support.
Indeed, the situation escalated considerably since the Russian and Ukrainian presidents met in Paris in December 2019 regarding the Donbas issue. A tripartite meeting between Ukraine, Russia and the EU took place in Minsk in December 2019, leading to the renewal for five years of the contract binding Gazprom and Naftogaz governing the transit of gas from Russia to the EU by Ukraine. However, Russia completed in mid-2021 the construction of its Nord Stream 2 pipeline project linking Russia and Germany and doubling the capacities of Nord Stream 1, which would cause revenue losses for Ukraine of around 3 billion USD per year. Germany warned that the pipeline would not be allowed to come into service in the event of a new escalation in Ukraine, and following Russia’s large-scale military invasion of the country launched at the end of February 2022, Nord Stream 2 certification was withheld. Ukraine's government declared martial law, mobilised its armed forces and called on citizens to resist. Western countries adopted an unprecedented range of sanctions against Russia and provided significant financial and humanitarian support, training and weapons to Ukraine.
The war with Russia continued throughout 2023, causing significant devastation and displacement of the Ukrainian population. Meanwhile, Ukraine continued its efforts to join the European Union, and in June 2023, the country was granted candidate status, a major step forward in its integration process. Ukraine received continued international support throughout 2023, including military aid, humanitarian assistance, and diplomatic backing. The United States, the European Union, and other countries played a crucial role in supporting Ukraine's resilience and resistance against Russia. Attempts were made to resume negotiations between the two countries; however, not much progress has been achieved so far.

Main Political Parties
Among the main parties represented in parliament stand:
- Servant of the people: founded in 2016 under the name of Party of decisive change, then renamed according to the comic television series whose main character is Volodymyr Zelensky
- European Solidarity (YeS): pro-European, it is the largest opposition party in the parliament
- All-Ukrainian Union "Fatherland" (Batkivshchyna): centrist, advocates for social justice, economic development, and closer ties with the European Union
- Voice (Holos): center-right, founded in 2019 by singer Sviatoslav Vakartchouk
- For the Future (ZM): centre-right, it is known for its close ties to the Ukrainian oligarch Ihor Kolomoyskyi
Trust (Dovira): supports the ruling coalition
- Platform for Life and Peace: pro-Russian, it was a new parliamentary group formed after the Opposition Platform – For Life was banned due to allegations of having ties to Russia. On 20 June 2023, the party was banned by court
- Restoration of Ukraine: parliamentary group founded in 2022, cross-party alliance dedicated to rebuilding and revitalizing the country in the aftermath of the ongoing Russian invasion.
Executive Power
The President is the head of state and is elected by universal suffrage for five years. He is the commander-in-chief of the army and it is he who appoints the Prime Minister - the head of government - once he has been appointed by Parliament, as leader of the party or of the majority coalition. The Prime Minister's term is five years. Executive power is shared between the President and the Prime Minister. The President chooses the Minister of Defense and the Ministry of Foreign Affairs, the other ministers of the Council are chosen by the Prime Minister.
Legislative Power
The legislature in Ukraine is unicameral. The parliament called Supreme Council consists of 450 seats with its members chosen on a proportional basis from those parties that gain 3% or more of the national electoral vote; members serve five-year terms. The President has the power to dissolve the Supreme Council, if he so wishes. The people of Ukraine have limited political rights.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of Ukraine please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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