When the war in Ukraine will end: updated forecast from the IMF.

Analysts from the International Monetary Fund updated the forecast for the duration of Russia's war against Ukraine. The end of intense hostilities has been pushed back by another year. This is stated in the IMF Memorandum.

The baseline scenario suggests that the impact of the war will be concentrated in territories with already reduced economic activity due to the security situation.

As stated in the updated baseline scenario, the war will wane in the last quarter of 2025, which will have a strong decelerating effect. At the same Time, Ukraine will be able to maintain moderate (economic) growth.

Meanwhile, in June, the IMF had predicted in the baseline scenario that the war would end at the end of 2024.

«Although growth will remain positive due to recovery, a longer war implies a negative impact on economic indicators due to more persistent uncertainty, labor shortages, import pressure related to defense and repair, and population dynamics», – stated in the memorandum.

Baseline scenario for 2024

The IMF estimates the winter energy deficit at 3-4 GW, which «corresponds to estimates from other stakeholders».

«Inflation will continue to rise to 9% (year-on-year) by December, reflecting a sharp increase in producer prices (mainly through energy) and labor costs. Real GDP growth in 2024 is forecasted at 3%. Growth is likely to moderately slow in the third quarter, while the early harvest and export resilience will offset the negative impact of the energy deficit», – the report states.

While external financing will increase gross international reserves to $42.6 billion, the forecast states.

Baseline scenario for 2025

According to the IMF forecast, in 2025 inflation will decrease to 7.5% by the end of the year due to reduced cost pressures. Meanwhile, the current account deficit will increase to $27.1 billion (14.3% of GDP) due to persistent import needs.

«Despite the deterioration in the current account, some reduction in net foreign direct investment and an increase in cash currency holdings outside banks amid uncertainties related to the war, gross reserves will increase to $44.9 billion with the support of external financing, forecasts the IMF», – the message states.

Post-war period

The IMF forecasts that post-war recovery will be slowed by the scars of a more prolonged war, but the medium-term outlook is based on a strong reform program and paths towards EU accession.

Overall, the updated baseline forecast implies a cumulative loss of real GDP level by 2% by 2027 (and by 2.7% by 2033) compared to the June forecast.

«However, potential growth will remain generally unchanged, as investment flows and overall factor productivity (driven by decisive reforms, reconstruction efforts, and confidence) will dominate the adverse impact of a longer war on core capital and labor force», – the forecast reads.

Recall, the IMF Board completed the fifth review of the extended financing program for Ukraine, resulting in the country receiving about 1.1 billion dollars, which will be used to support the state budget.

Additionally, Ukraine has worsened its position in the economic freedom ranking, being among the countries with the lowest level of economic freedom in the world.