Weak performance of the agricultural sector dragged down Ukraine’s economic growth last year

Ukraine’s GDP growth slowed more than expected in 2024. The State Statistics Service of Ukraine reports that the economy grew by 2.9 %, down from its preliminary estimate of 3.4 % in February. At the same time, 2023 growth was revised upwards slightly to 5.5 %. Last year’s slowing growth mostly reflected Russia’s bombardment of energy infrastructure and worsening labour shortages. The year finished, however, with an unexpected negative blow from the poor performance of the agricultural sector. Defying expectations, Ukraine’s GDP contracted by 0.1 % y-o-y in the fourth quarter of 2024.

Ukraine’s agriculture & forestry sector saw the biggest output drop last year

Source: Ukrstat.

Ukraine’s agricultural sector last year was hit by drought resulting in a disappointing late harvest. Agricultural output contracted by over 30 % y-o-y the fourth quarter of last year. For 2024 overall, agricultural output decreased by 7.3 %. Part of the steep decline was due to the high reference basis from the exceptionally good 2023 harvest. As a result, agriculture & forestry accounted for less than 7 % of Ukraine’s GDP, down from 9 % in 2023. Output of the energy sector last year declined somewhat less than expected last year thanks to effective repair and protective measures (down by 2.7 %). Russia’s extensive shelling, bombing and drone strikes destroyed half of Ukraine’s energy production capacity last year.

Private consumption was the largest driver of demand-side growth last year. The rise in household consumption (6.8 %) was particularly rapid due to an acceleration in real wage growth. The National Bank of Ukraine (NBU) estimates that real wages grew by over 14 % in 2024. The volume of exports also rose by 10 % in 2024, the first time since the full-on invasion of Ukraine in 2022. The growth particularly reflected Ukraine’s effective use of Black Sea shipping routes. In addition, the volume of imports increased by 7.7 % on bolstered consumer purchasing power. While the overall impact of foreign trade on GDP was still negative, it was less than in previous years. Driven by government projects related to infrastructure and defence industries, fixed investment rose by 3.5 % last year. Private sector investment also increased, with emphasis on building up alternative systems in electrical power generation and logistics.