Since March 2022, the Centre for Economic Strategy (CES) has been preparing monthly reviews of Ukraine’s economy during a full-scale war. The special topic of the July review is: «What is happening with the Ukrainian budget? Deficit, partner assistance, budget declaration».
All previous reviews can be found under the link.
Key changes in the Ukrainian economy in August:
Monetary and FX sectors: Inflation falls to 14.1%, key policy rate remains steady at 15.5%. The key policy rate remains unchanged due to slower-than-expected decline in inflation and emerging pro-inflation risk with limited space of possible decrease by end-2025. Reserves went down, while Hryvnia remained relatively stable to Dollar and Euro with slight signs of appreciation.
Fiscal sector: Every third Hryvnia of tax revenues in July was Import VAT. The state budget received UAH 148 bn of taxes, adding 32% y-o-y. War expenditures via own sources decreased in June while defence aid increased.
Foreign trade: Ukrainian exports continue to stagnate, while imports show two-digit growth. This creates a trend of increasing trade deficit. The deficit is driven by fundamental reasons related to the war-related needs: mainly imports of weapons, dual-use products, machinery required for energy infrastructure. Further trade balance trend is expected to worsen but is highly dependent on foreign financing and the developments of the war.
Sectoral analysis: Despite the resumption of Russian attacks on energy infrastructure, the sector remains stable and continues to support economic growth. Consumer and business sentiment indicates that the economy is slowly recovering in Q2 2025. Early grain and oilseed yields are lower than in 2024. However, a good harvest and exports are expected this year, primarily due to the late crops.
Special topic: The role of arms production in the economy grows during full-scale war, with a rising number of enterprises and people being employed. Growth in defence production exceeds the pace of recovery in other industries, making a significant positive contribution to GDP. However, defence production is mainly financed from the budget and is experiencing a lack of funding. International financing, particularly according to the ‘Danish model’, could provide an additional boost to the industry.
See our report below for further details.
Invited speakers:
- Nataliya Mykolska, Executive Director of Diia.City United;
- Lyubov ShipovichFounder of the Dignitas Charitable Foundation;
- Andriy teliupaDeputy Minister of Economy, Environment and Agriculture of Ukraine;
- Valentyna VedrovskaGR Manager of the Ukrainian Council of Defence Industry;
- Anna ZarudnaGR Manager of the Association of Private Arms Manufacturers ‘Tech Forces in UA’.
Moderator: Hlib Vyshlinsky, Executive Director of CES.
