Ukraine’s Financial Stress Index at its Lowest Since Russia’s Invasion

The liquidity, solvency, and operational resilience of the banking system do not raise any immediate concerns, Ukraine’s central bank, the National Bank of Ukraine (NBU) wrote in its latest Financial Stability Report.

The Index of Financial Stress, produced by the central bank, indicated that sentiment in the market had become calmer in the second half of 2024. The main reason for this is the decreased interest rates among Ukrainian bonds and Eurobonds after successful debt restructuring. 

Source: NBU

War remains the key risk to financial stability of the country, Director of the NBU Financial Stability Department Pervin Dadashova said during the briefing that accompanied the release of the report. 

Causes of Ukraine’s 2024 economic stability

Ukraine is also feeling more secure as 2025 approaches, as the G7 Extraordinary Revenue Acceleration (ERA) Loan to Ukraine will fund its budget during the coming year. NBU said that inflation was higher than forecasted, but this would be temporary. “Inflation has accelerated now, but inflationary pressures will ease in the middle of next year after the new harvest arrives on the market,” Dadashova said. 

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The central bank believes steady domestic and external demand will contribute to GDP growth in 2025. 

“Domestic demand is not overheated now. It had decreased during 2022-2023 and recovered in 2024, but its level is still not as high as during pre-war times. The level of demand growth has not been exhausted,” First Deputy Governor of the NBU Kateryna Rozhkova replied, answering the question from a Kyiv Post reporter. 

How Ukrainian business is recovering after Russia’s invasion 

After a short period of seasonal volatility, corporate and retail deposits at the banks returned to growth. The net hryvnia corporate loan portfolio also increased by more than 20% over the year (between November 2023 and November 2024), while the retail loan portfolio grew by over 30%, according to the press release. 

Enterprises indicate expected production growth, but business investment sentiment remains suppressed. 

The role of concessional loans is also decreasing, but this is a positive sign that more and more Ukrainian companies recovered enough to pay market interest rates for loans. “Many program participants could obtain and service loans under market conditions, highlighting the need to focus the program on clients who require support,” Dadashova said.