The European Bank for Reconstruction and Development (EBRD) forecasts that Ukraine's economy will grow by 3.5% in 2025 and 5% in 2026, assuming an end to hostilities, according to a new report by the organization.
Updated forecast for 2025–2026
According to the EBRD, Ukraine's GDP growth rate in 2025 will be lower than previously expected . The main reason for the forecast correction was uncertainty due to the continuation of the war and the dependence of economic recovery on the security situation.
In 2026, economic growth could accelerate to 5% , but only if hostilities cease and the macroeconomic situation stabilizes .
Ukraine's economy, which grew by 3.0 percent in 2024 despite the pressure of Russia's full-scale war, is forecast to grow by 3.5 percent in 2025 and strengthen further to 5.0 percent in 2026, assuming an agreement to end hostilities is reached this year
The latest EBRD REP report revises Ukraine's previous growth forecast for 2025 downward by 1.2 percentage points. In the report from September last year, growth was expected at 4.7 percent in 2025.
“Although Ukraine entered 2025 with external financing secured for a year, it faces slowing economic growth and accelerating inflation due to the consequences of the war, which began with the Russian invasion in February 2022,” the EBRD explained.
The ongoing war and Russia’s massive attacks on Ukraine’s electricity infrastructure have led to both electricity shortages, forcing Ukrainians to pay high prices for imported electricity, and acute labor shortages, the report said. “Real GDP growth has slowed markedly from more than 5.0 percent in the first half of 2024 to about 2.0 percent in the second half of the year; overall GDP growth in 2024 is estimated at 3.0 percent,” the report said.
The recovery of inflation in the second half of 2024 was reportedly driven by rising electricity costs, adjustments to regulated utility prices, rapid real wage growth, and currency depreciation against the US dollar following the loosening of the exchange rate peg in October 2023.
Annual inflation reached 12 percent in December 2024 and is likely to remain at a similar level in the first half of 2025 before declining to single digits by the end of the year
The central bank responded by raising the policy rate twice from December 2024 from 13.0 to 14.5 percent, with, as noted, “further tightening of monetary policy likely.”.
Ukraine’s budget deficit for 2025 is projected at 19.4 percent of GDP and is fully financed by external budget financing of USD 38.4 billion. This includes USD 13.7 billion from the EU under the Ukraine Facility, USD 22.0 billion from the G7 countries based on proceeds from frozen Russian assets, and USD 2.7 billion from the IMF.
“The negative factors that affected growth in the second half of 2024 are likely to persist in 2025,” the EBRD said.
On the positive side, it is reported that “proven enterprise resilience and adaptability, a well-functioning Black Sea trade corridor, strong public consumption stimulus, and increased military procurement from domestic enterprises are expected to support economic growth.”.
In September, the EBRD downgraded its forecast for Ukraine's economic growth for 2025 by 1.3% to 4.7% due to damage to energy infrastructure as a result of Russian attacks.
