- In 2025, wages in Ukraine will increase, but inflation will besides increase - convinced Sergei Fursa
- — We continued to show economical growth and household income reached nominal levels before the war, says the expert
- The labour shortage situation is likely to deteriorate in 2025.
Maria Tsiptsiura: Let's start with how we will live in 2024. In a fresh interview you said that the Ukrainian economy – given the current situation – is simply a miracle. Can we say that this trend continued throughout 2024? How did we manage in general this year – the 3rd year of war?
Sergei Fursa: In fact, this trend persisted. We continued to show economical growth and household income reached nominal levels before the war. Next year, real income will even exceed the pre-war level. Thus, the economical miracle continues with external support, which helps keep comparative economical stability.
The only thing that didn't go as planned in 2024 was inflation. We observed its acceleration and yet reached 12%, although it was expected to be lower than 10%. This increase was due to respective crucial factors. First, the cost of electricity. Due to the harm to the company's energy system, they were forced to import electricity, which importantly increased its cost. As a result, this put force on prices and increased production costs. Second, the harvest was worse than expected. This besides affected prices. And of course, rising income in both the private and public sectors has driven inflation.
Associated Press/East News / East Newsdemolition in Kiev after Russian raid
Ukrainian companies increase wages
Given the war and the hard situation, how do companies manage to rise wages?
Companies are forced to rise wages due to severe shortage of workers. There is simply a critical shortage of people in the market. To halt employees, companies are forced to rise wages. This led to an increase in the amount of money that people have in their hands, without an adequate increase in productivity. As a result, this besides caused inflation. So everything developed almost as expected, but that inflation was higher.
What are the forecasts of gross growth in 2025? Will this trend continue?
Of course, there'll be growth. I would be careful if I said it would be more than 10%. Nominal revenues have already exceeded pre-war levels. Now we're talking about real income.
Last time we saw highest gross in 2021. At the time, on the eve of the full-scale invasion, Ukraine's GDP was at a evidence level, as was average wages. Now we scope a higher level than then.
What kind of inflation do we anticipate in 2025? How much will household items increase?
Inflation is likely to stay rather high. This will not be a transition to hyperinflation or uncontrolled processes, but inflation will stay at around 10%. Inflation will by far exceed 10% in the first 1-3 months. Then a gradual decline is expected, but this depends on many unknowns. How will NBU control the situation? Will it be able to reduce inflation to 10% or below? In any case, it will only happen in spring, summertime or even autumn.
The price of electricity has already risen due to the shelling and that is simply a fact. It is hard to anticipate a further crucial increase in its costs as this origin has already been included in the prices. Therefore, electricity will not have a crucial impact on further price increases.
Zinchenko/Global Images Ukraine via Getty Images / Getty ImagesPeople are walking close a Christmas tree in Sofia Square in Kiev
As far as wages are concerned: we have already said that human income is increasing not due to the fact that companies want to rise salaries, but due to a shortage of workers. How critical is the current situation and will it deteriorate in 2025?
It'll most likely get worse. This is due to continued mobilisation, although not at the pace required by the State. In addition, it is worth noting that a certain percent of people travel abroad. Last year, about 400,000 people left the country. However, it should be understood that thanks to the experience of the pandemic, many people inactive work remotely, even erstwhile they are outside Ukraine. This means that any of these 400,000 people did not vanish from the Ukrainian labour market. However, any have already found work in another countries.
The problem of shortage of workers will persist and even deepen. This will be peculiarly visible in the context of expected economical growth. Although it will most likely not be as dynamic in 2025 as in 2023-2024, it will inactive require additional labour. As a result, staff shortages will stay 1 of the key challenges likely to increase.
W Ukraine lacks hands to work
I want to learn a small more about migration processes. Migration processes. To what degree will they proceed this year? Could the origin of possible future negotiations influence this? Finally, society has a very mixed approach to this issue.
We can already see any "slow" migration processes. Those who left earlier are inactive abroad. This is simply a kind of reflection of migration moods. It is likely that this year the rate of migration will stay at the same level, without any greater acceleration. No extremist change is expected.
How about we talk about numbers or percentages? For example, how many people are missing in the Ukrainian labour market? Or, what's the request for employees?
I don't know these numbers, and I don't know those numbers. In an perfect situation, we are talking about millions of people who would be very useful to the Ukrainian labour market. I want they'd come back. Those who are hiding from mobilization now, mostly work remotely. Eventually, they gotta make a living, so they inactive work and make money.
The experience of working during the pandemic has taught many people to work remotely. Those who hide from mobilisation do not have specified a critical impact on the labour market, especially given the large grey zone. any of these people can work and stay completely invisible in authoritative statistics.
To what degree do you think the mobilisation process will be strengthened this year?
The number of reservations will decrease importantly due to the fact that last year this process got out of control. There was a corruption origin erstwhile regional authorities were given the chance to book people. This led to a large shortage of personnel in the army. By 2025, the number of reservists will be considerably lower.
Sooner or later, the state will be forced to extend its mobilization age. Young people aged 18-24 are usually the main mobilization base due to the fact that they are best suited for the military in terms of physical characteristics. It is clear that people aged 24 are better able to carry out military tasks than those aged 54. Sooner or later, the state will gotta extend its mobilization age. possibly not from the age of 18, but at least from 21.
Mykola Kalyeniak / PAPUkrainian soldiers in Kharkiv
This will happen in the baseline script if the war continues throughout 2025. In this case, the mobilisation processes will be intensified. The simplification in booking will besides partially resolve this problem, as those who are booked have already provided their data. You know where they work, and, if necessary, they can become the first clients of military draft offices if they lose their reservation.
Ukraine has provided assistance until mid-year
What can we anticipate erstwhile it comes to global aid?
Everything here is absolutely stable. We have guaranteed aid for 2025 and even partially for 2026. This was possible thanks to the G7 decision to allocate EUR 50 billion from Russian assets.
In terms of budget financing and macro-financial stability, everything is guaranteed. More questions arise about military aid due to the fact that it depends mostly on the position of president of the United States and American military aid.
However, this issue will become more crucial in the second half of the year. Currently, Ukraine has been allocated crucial amounts of military aid, which continues to flow and the country uses it. But from the second half of the year onwards, there will be an urgent question: will the United States supply further military assistance?
On the 1 hand, the processes related to the production of weapons are already being closed in Europe. This is slow, but advancement is being made, and this year production will increase.
On the another hand, we realize that Trump represents the Republican Party. This organization represents conventional enterprises, including military production. erstwhile we talk about military aid, we mean money that stays in America and is utilized to fund a military-industrial complex.
That's why Trump doesn't have a peculiar motive to cut off the aid. possibly it will be organised in a different way, for example in the form of loans, as the lend-lease model actually repeats. Anyway, it'll work 1 way or another.
Regarding financial assistance, it is clear that Trump will be little inclined to support Ukraine. But for the next year and a half, his position is not critical to us.
As far as military aid is concerned, it is in the interests of the Republican Party. We can so stay optimistic that the United States will proceed to supply military support to Ukraine for Trump's presidency.
