Kyiv, February 2025 – The latest macroeconomic forecast by the Institute for Economic Research and Policy Consulting and the German Economic Team highlights Ukraine’s economic trajectory for 2025-2026, emphasizing growth amid continued uncertainty due to the ongoing war.
Despite the devastating impact of Russia’s full-scale invasion, Ukraine’s economy has shown resilience, with GDP growth projected at 2.9% in 2025 and 3.2% in 2026. However, real GDP will remain 17.4% below pre-war levels, reflecting significant structural challenges.
Key Economic Projections:
- GDP Growth: 3.5% in 2024, followed by 2.9% in 2025 and 3.2% in 2026.
- Inflation: Expected to remain in double digits at 12.5% in 2025 before slowing to 6.5% in 2026.
- Public Debt: Projected at 89% of GDP in 2025, declining to 85% in 2026.
- Current Account Balance: A temporary equilibrium is expected in 2025 due to international grants, but a deficit of 5.7% of GDP is forecast for 2026.
Fiscal Forecast:
- Ukraine’s budget deficit is expected to remain high, reaching 20% of GDP in 2025 and 19% in 2026.
- Financing needs, including domestic debt refinancing, are estimated at $52.5 billion in 2025 and $55.2 billion in 2026.
- International aid remains crucial, with expected grants and loans of $48 billion in 2025 and $36 billion in 2026.
- Public debt, while declining slightly, will remain elevated, necessitating continued fiscal discipline and external financial support.
Economic Drivers:
- Demand Side: Private consumption and emergency reconstruction investments will remain key growth drivers.
- Supply Side: Moderate sectoral growth is expected, with agriculture, industry, and trade recovering, but energy sector disruptions will continue to limit expansion.
- Trade Balance: While exports will improve due to enhanced logistics in the Black Sea corridor, the trade deficit remains a challenge, exacerbated by high military and energy-related imports.
Key Forecast Risks:
- The war’s evolution remains the primary risk, with potential escalations threatening infrastructure and economic stability. Further destruction of key energy infrastructure could significantly impact economic output.
- International support is crucial; any delays or reductions in aid could disrupt the recovery path and lead to a deepening fiscal crisis.
- The labour market remains constrained due to mobilization and migration, leading to wage pressures and productivity concerns. A severe shortage of skilled labour may further hamper economic recovery.
- Energy crisis: Continued attacks on Ukraine’s energy infrastructure pose a major risk, potentially leading to extended power outages and increasing costs for businesses and households.
- Agricultural output: A decline in agricultural productivity due to landmine contamination and disrupted supply chains could weaken export revenues.
- Financial sector instability: The banking sector remains under pressure from high public debt and external economic shocks, necessitating vigilant regulatory oversight.
Despite these challenges, Ukraine’s economic adaptability and continued international assistance remain crucial for sustaining growth and stability. The full macroeconomic forecast is available upon request.
For media inquiries, please contact:
IER, Olena Shkarpova, shkarpova@ier.kyiv.ua
