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The UK Ministry of Defence shared an analysis on the economic outlooks for Ukraine and Russia in its latest update on X (Twitter).
Key Findings on Ukraine
- After a significant GDP contraction of 29% in 2022 and a recovery of 5% growth in 2023, Ukraine is projected to achieve real economic growth of 3% in 2024.
- Inflation, which peaked at around 20% in 2022, is forecasted to decline to an average of 5.8% in 2024, according to the IMF.
- Defense spending is expected to consume approximately 60% of Ukraine’s state expenditures by 2025, reflecting the ongoing financial burden of the war.
Key Findings on Russia
- The Russian economy is projected to grow by 3.6% in 2024, primarily fueled by state-driven expenditures, particularly in the defense sector.
- However, growth is anticipated to slow in 2025 due to rising inflation, workforce shortages, and the cumulative impact of Western sanctions.
- By 2025, defense spending is expected to account for 32% of Russia’s budget, overshadowing social programs and other non-military sectors.
- Inflation in Russia is predicted to remain high, with an average annual rate of 7.9% in 2024, exacerbated by increased government spending.
Broader Context
The report underscores the strain on both nations’ economies due to the war, with Ukraine relying heavily on international aid and Russia increasingly directing resources towards sustaining its military-industrial complex.
Recently, EU finance ministers criticized Russian claims about its economic resilience, noting that Western sanctions have significantly weakened its war machine. Additionally, disputes have emerged within the EU regarding IMF’s plans to engage with Russia on economic matters for the first time since the full-scale invasion began.
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