Ukraine: War-torn economy expands at a slower pace in Q4
According to a preliminary estimate, GDP grew 4.7% year on year in Q4 2023, down from Q3’s 9.6% rise. This brought full-year growth to 5.3% in 2023 as a whole, recovering from 2022’s 28.8% decline.
Looking at available data, Q4’s moderation was broad-based. Private spending growth eased to 10.0% in Q4 (Q3: +12.3%), and public spending expanded by 4.0% (Q3: +17.0%). In addition, fixed investment rose by 19.5% in the quarter, cooling from Q3’s whopping 58.9% expansion.
On the external front, exports of goods and services contracted by 6.0% in Q4 (Q3: -9.6%), as the collapse of the Black Sea Grain Initiative in July continued to weigh on trade. Meanwhile, imports swung into contraction, falling 6.2% (Q3: +3.6%), in line with moderating domestic demand.
Economic growth is seen dipping below 2023’s rate in 2024 as domestic demand decelerates. A rebound in exports should support momentum, however. The outlook for Ukraine’s economy continues to hinge on the course of the war, the counteroffensive in the east and inflows of international aid.
Analysts at the EIU commented on the outlook:
“In the first half of the forecast period, growth will be driven primarily by government consumption, as was the case in 2023. Towards the second half, private consumption will be supported by the normalisation of labour conditions in the vast majority of the country. Overall, steady external financial flows and fiscal expenditure will underpin investment. Deepening ties with the EU as part of Ukraine’s accession process will also have a positive effect on the country’s ability to realise its export potential and as a recipient of investment.”