Experts at the International Monetary Fund have updated their forecasts for the end of Russia's full-scale war against Ukraine.
This is stated in the sixth revision under the Extended Fund Facility IMF.
IMF Baseline Scenario Regarding Ukraine
According to the baseline scenario, then the full-scale war of the Russian Federation against Ukraine will end at the end of next year.
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The sixth report of the International Monetary Fund notes that this year's real GDP growth reached 4% in annual terms. Consequently, this is 1 percentage point more than in the fifth review.
At the same time, the economic impact of the winter power shortage may be weaker than previously assumed. This is due to a number of factors:
- business investment in its own generating capacity;
- growing potential for imports from Europe;
- efforts to repair and install additional generating capacity and distribution networks.
So, year-end inflation was revised upward by 1 p.p. to 10%, primarily due to further pressure from accelerating growth in raw food prices, which also affected basic food products, as well as depreciation of previous periods, rising wages and energy prices.
According to IMF estimates, the forecast for real GDP growth remains unchanged at 2.5-3.5% in 2025.
It is noted that this is due to the large potential from accelerating the repair of energy capacities this year and the introduction of new capacities in 2025, which, however, will be offset by the effects of a tighter labor market, which will contribute to higher income and consumption growth against the backdrop of easing price pressures.
Thus, average inflation was revised upward relative to the previous IMF report by 1.3 p.p. to 10.3%.
IMF's Negative Scenario for Ukraine
At the same time, the IMF's Negative Scenario forecasts that the war in Ukraine will last longer and end in mid-2026.
The scenario envisages a prolonged and intense blow to economic activity, fiscal needs, and the balance of payments compared to the baseline scenario, with corresponding implications for macroeconomic policy.
Consequently, the overall external financing deficit in the worsened scenario is $177.2 billion, compared to $148 billion in the baseline scenario.
In particular, the negative scenario envisages:
- a contraction in real GDP followed by a slow recovery;
- higher and more persistent inflation;
- a deterioration in the current account balance excluding grants;
- international reserves will remain below 100% of the ARA criterion until 2027;
- an overall deficit excluding grants that will still exceed 20% until 2026 years.
