IMF predicts Russia-Ukraine war may last until 2025, economic shock ahead

The baseline scenario predicts the cessation of active hostilities in 2024.

The downside scenario predicts the continuation of the war will affect the sentiments of companies and households, the pace of migrant returns, and cause further damage to the energy sector from Russian attacks.

This would result in a sharp real GDP decline of 1.7% in 2024 (versus the lower end of 2.5–3.5% growth in the baseline scenario) and a 1% drop in 2025.

"High defense needs and lower economic activity would cause the fiscal deficit to further increase in 2024-25," reported UBN following the Fund's forecast analysis.

"Imbalances in the FX [foreign exchange] market would resurface and then be expected to persist for longer, given worse export performance, leading to higher nominal depreciation [of the hryvnia] in the coming years before converging to the baseline trend. The subsequent recovery would be more subdued than in the baseline scenario, given the even greater damage to the capital stock and weakened balance sheets, with the result that output would remain well below pre-war levels."

The updated cumulative financing gap in the downside scenario is estimated at around $140.7 billion, about $19 billion higher than the baseline forecast for 2023–27 ($121.9 billion).

The IMF reportedly forecasted a power deficit in Ukraine until 2026.