This is reported by RBK-Ukraine referencing the Memorandum with the IMF. Reports are also provided by Kontrakty.UA.
The negative scenario anticipates a more prolonged and intense war along with a more extended and severe shock to the economy compared to the baseline scenario, which assumes that the war will conclude in the fourth quarter of 2025.
The total external financing deficit under the negative scenario amounts to $177.2 billion, compared to $148 billion in the baseline scenario. The forecasts for key macroeconomic variables in this scenario are significantly worse than in the baseline scenario, implying a contraction in real GDP with a subsequent slow recovery and higher, more persistent inflation.
The scenario suggests that the shock will begin in the first quarter of 2025 and will have a profound impact on the sentiments of companies and households, as well as on the rate of returning migrants, leading to further extensive damage to energy infrastructure and power outages, in contrast to the baseline scenario.
As a result, real GDP growth will be weaker than in the baseline scenario, specifically -2.5% in 2025 (compared to 2.5-3.5% in the baseline scenario).
High defense needs and weakened economic activity will lead to a continued increase in the budget deficit in 2025-2026. An imbalance in the currency market will reappear and is expected to persist for a longer period due to poorer export performance.
Further recovery of production will be more subdued than in the baseline scenario, considering the even greater damage to fixed capital and deteriorating labor dynamics, along with weakened balances, resulting in production remaining below pre-war levels for an extended period.
The current negative scenario implies a degree of convergence with the baseline level in the medium term, supported by the anchor of EU accession, returning migration flows, and private investments.
"Overall, extensive discussions with the authorities regarding emergency action plans during the sixth review confirm that the program remains robust even in such a negative scenario. The strong political commitments of the authorities and their track record, along with renewed financing guarantees from international partners and anticipated relief from the debt burden, instill confidence that even in this updated negative scenario, the program's goals of maintaining macroeconomic and financial stability, restoring debt sustainability, and ensuring medium-term external viability can be achieved," experts from the IMF note.
Recall that the IMF has updated the baseline scenario, according to which Russia's war against Ukraine will end in late 2025. This scenario anticipates economic growth for Ukraine in 2025, accelerating to 5.3% growth in 2026.