UKRAINE’S BRUISED BUT RESILIENT ECONOMY
War has turned Ukraine’s economy into a case study in survival. More than three years after Russia’s full-scale invasion, GDP is barely inching forward, foreign donors keep the budget afloat, and infrastructure is battered with depressing regularity. Yet the country has not collapsed. Instead, it has settled into a precarious equilibrium: one part economic resilience, one part external lifeline.
The numbers tell a sobering story. In the first quarter of 2025, real GDP grew by just 1.1% compared with a year earlier, but actually shrank on a quarter-to-quarter basis.¹ The IMF expects growth of only 2% this year—an anaemic pace by post-war standards—with consumer inflation stuck at a punishing 12.6%.² The World Bank is no more optimistic, forecasting similar growth in 2025. Its baseline scenario offers some hope: if the guns fall silent and reconstruction begins in earnest, GDP could rebound by more than 5% in 2026.³
Such forecasts, however, rest on fragile foundations. Ukraine’s economy is still dominated by the exigencies of war. Russia’s continuing bombardment of the energy grid keeps factories in the dark, pushes up costs, and stifles industrial output. Transport bottlenecks and agricultural disruptions compound the effect. The National Bank of Ukraine recently trimmed its own growth forecast from 3.6% to 3.1%, a tacit acknowledgement that the war’s toll is heavier than anticipated.⁴
Fiscal policy offers little relief. The government spends vastly more than it raises, and the gap is bridged by international support. In June, the IMF released another $0.5bn under its Extended Fund Facility, congratulating Kyiv on reforms ranging from customs transparency to new digital tax reporting.² But donor patience is not infinite. A monitoring group reported in May that Kyiv had failed to meet four of 16 quarterly benchmarks tied to EU assistance, placing almost €2bn of funding at risk.⁵
The reconstruction challenge dwarfs even these short-term struggles. According to a joint World Bank-led assessment, Ukraine will need around $524bn over the next decade to repair infrastructure, rebuild cities, and revitalise its economy.⁶ That figure rises with every new missile strike on a power station or logistics hub. Investors are wary, and private capital remains largely on the sidelines.
Structural weaknesses persist, too. Ukraine’s oligarchs—though weakened since 2022—still cast long shadows over key industries. A recent study highlights how concentrated ownership and vertical integration distort value chains and depress productivity.⁷ Governance and corruption problems add another layer of fragility, complicating donor oversight and slowing reforms.
And yet, the resilience is remarkable. Despite bombardment, firms continue to operate. The IT sector has maintained surprising momentum, exporting services even during blackouts. Farmers adapt to disrupted supply chains. Households adjust with grim pragmatism. It is an economy that refuses to die, but cannot quite thrive.
In the end, Ukraine’s economic fate is tethered to the battlefield. Without peace, growth will limp along, dependent on Western largesse. With peace—and sustained reform—the country might yet turn its battered economy into something sturdier. For now, survival remains the most realistic form of success.
References
State Statistics Service of Ukraine, GDP Q1 2025, via Interfax Ukraine, May 2025.
IMF, Eighth Review under the Extended Arrangement under the Extended Fund Facility for Ukraine, June 30 2025.
World Bank, Europe and Central Asia Economic Update, May 2025.
UIFuture Digest, “Macroeconomic Digest of Ukraine,” May 2025.
DiXi Group, Monitoring of the Implementation of the IMF Program and the Ukraine Plan, May 2025.
Reuters, “Ukraine needs $524 billion to recover and rebuild,” February 2025.
Arxiv.org, “Oligarchic Influence and Value Chain Distortions in Ukraine,” August 2025.