By Olena Harmash
KYIV (Reuters) -Ukraine’s central bank left its key interest rate steady at 15.5% on Thursday for the third consecutive meeting, saying it expects inflation to continue to ease but wartime risks will constrain economic growth.
Economic growth will slow to 2.1% this year compared with 2.9% in 2024, it said in a statement.
The central bank previously predicted 2025 growth at 3.1% but it cut its forecast due to more intense Russian attacks in recent months.
“Going forward, the pace of recovery will depend on the course of the war,” the bank’s governor, Andriy Pyshnyi, told media.
Russia’s full-scale invasion in February 2022 devastated the economy, with gross domestic product plunging by about one-third in 2022. The economy posted modest growth in 2023 and 2024, but it is still about 20% smaller than before the war.
Pyshnyi said that public spending and a steady inflow of international aid had helped the economy in the first half of the year. But more intense Russian air attacks and further destruction of production facilities, infrastructure and housing had restrained growth, he said.
The war has heated up in recent months with swarms of drones launched by both Moscow and Kyiv, fighting raging along more than 1,000 km (600 miles) and dim prospects for peace.
Officials said the war was also causing staff shortages amid persistent emigration.
GDP grew by 0.9% year-on-year in the first quarter of the year, data showed.
Bad weather also weighed on growth prospects, delaying crop sowing and hampering future harvests in the farm business that is a major sector of the economy, the bank said.
Another key risk for the economy was an insufficient level of international financial aid, Pyshnyi said.
The bulk of Ukraine’s revenues goes to defence, and aid from allies is crucial for Kyiv’s ability to finance social and humanitarian spending. The government has received $24 billion out of $54 billion expected in aid in 2025.
He also said the government worked with the International Monetary Fund, the country’s key lender, on approaches for a new support program.
The central bank also said it expects inflation to reach 9.7% at the end of 2025 and forecasts it to slow to 6.6% in 2026.
(Reporting by Olena HarmashEditing by Frances Kerry)
