17.11.2025
Ukraine’s economy is projected to remain resilient despite the prolonged war. Real GDP growth is forecast at 1.6% in 2025 and 1.5% in 2026, constrained by continued attacks on critical infrastructure, supply disruptions and labour shortages, before rebounding to 4.7% in 2027 as reconstruction is assumed to start in earnest. Inflation is projected to peak at around 13% in 2025 and to ease gradually thereafter. Persistent war-related spending needs are expected to keep the general government deficit very high throughout the forecast horizon, while gross public debt is projected to rise to around 94% of GDP by 2027.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 1.6 | 1.5 | 4.7 |
| Inflation (%, yoy) | 13.1 | 9.8 | 8.8 |
| Unemployment (%) | 13.3 | 12.9 | 11.6 |
| General government balance (% of GDP) | -23.8 | -21.2 | -14.4 |
| Gross public debt (% of GDP) | 85.0 | 91.6 | 93.7 |
| Current account balance (% of GDP) | -18.9 | -17.7 | -16.2 |
Economic growth decelerated in 2025 as the war takes a toll on the economy
After losing momentum in mid-2024, growth remained subdued in the first half of 2025 despite relatively strong private consumption and the growth impetus from the expanding domestic defence industry. Intensified attacks on energy infrastructure and unfavourable weather conditions weighing on agricultural output created supply-side constraints, pushed up imports and reduced exports, while labour shortages and tight monetary conditions also dampened activity. An improved harvest in the second half of 2025 and sustained private consumption are expected to lift annual GDP growth to 1.6%. In 2026, output is projected to remain constrained by the security situation, continued supply disruptions and labour shortages, with GDP growth forecast at 1.5%, while domestic demand is expected to remain the primary driver through private consumption, defence spending and ongoing emergency repairs and reconstruction. Assuming conditions for comprehensive reconstruction are in place from the start of 2027, growth is projected to pick up markedly to 4.7%, as reconstruction investment and easing bottlenecks outweigh the gradual decline in defence-related spending.
Inflation set to peak in 2025
Inflation accelerated again from mid-2024 and is expected to remain elevated due to rising production costs (notably electricity and labour) and war-related disruptions. Inflation is projected to peak at 13.1% in 2025, before gradually easing as supply shocks fade and tight monetary policy helps contain price growth, reaching 9.8% in 2026 and 8.8% in 2027.
War-related disruptions in the labour market to maintain high unemployment rates
Large-scale displacement and conscription have significantly reduced the labour force, leading to acute shortages and strong wage growth. Labour shortages are expected to remain pronounced due to slow reintegration and persistent regional and skills mismatches. As a result, unemployment is projected to remain high over the forecast horizon, though on a gradually declining path.
Public deficit to remain high amid sizeable war-related expenditure needs
Despite strong tax revenue growth, the general government deficit is projected to widen in 2025 due to persistent and sizeable war-related spending pressures, including higher defence procurement and personnel costs. The deficit is estimated at 23.8% of GDP in 2025 and is projected to narrow to 21.2% in 2026 as additional revenue measures take effect and nominal GDP growth remains strong. In 2027, stronger growth, improved tax collection and a gradual moderation in defence spending are expected to reduce the deficit further, though it remains very large. Gross public debt is projected to increase to 93.7% of GDP by 2027 (excluding ERA loans, in line with the treatment applied in the IMF debt sustainability analysis).
Source: European Commission. European Economic Forecast, Autumn 2025.
