World Bank experts estimate that the economy will grow by 2.2% in 2024, driven by rising real wages, a positive fiscal impulse, and subdued inflation. In the most recent Economic Outlook, the experts say that private consumption and investments will support growth, aided by accommodative monetary policies.
However, particular risks persist. Private consumption and investment growth could remain below historical averages due to high energy and food prices, as well as lack of consumer and investor confidence. Net exports may impede growth due to increased demand-driven imports, on the one hand, and lower exports to CIS markets due to logistical problems, amplified by lower re-exports to Ukraine, on the other hand. As for the supply, growth in the services sector, particularly IT, transport and travel, as well as public services, which will be supported by IT outsourcing opportunities and public sector modernization, is expected to support growth in 2024.
“Growth in the industrial sector is expected to remain dormant, with output still below pre-Russian invasion of Ukraine levels due to weak external demand. The construction sector faces challenges due to high costs of materials and existing uncertainties, while the transport sector will continue to benefit from the partial redirection of trade from Ukraine via Moldova, albeit in smaller volumes. The contribution of the agricultural sector is forecast to be limited, mainly due to high costs, logistical difficulties and productivity constraints,” says the Economic Outlook.
According to World Bank experts, medium-term economic growth will be supported by a number of favorable factors, including reforms aimed at economic diversification and competitiveness enhancement, aligning with the EU accession agenda, a positive fiscal stimulus and favorable interest rates. The gross domestic product will gradually approach its potential in 2025 as EU accession reforms will accelerate. The services sector will be the main driver of growth, with significant contributions from the IT sector and the public sector. Supported by improved external demand and regional investment sentiment, a gradual recovery of the industrial sector is expected, with the output forecast to reach pre-Russian invasion of Ukraine levels in 2025.
According to the WB experts, the food industry should gradually recover together with the growth of domestic demand, although it will face increased challenges due to higher input costs and competition from neighboring countries. The energy sector will have a moderate performance, characterized by significantly higher energy prices compared to pre-pandemic COVID-19 levels. The authorities are planning extensive energy efficiency measures, focusing in particular on infrastructure construction. Predominantly export-oriented industries such as the textiles, pharmaceuticals and electrical equipment ones, will see growth. The contribution of the agricultural sector is expected to remain modest in the medium term, constrained by productivity challenges.
