Ukraine’s economic outlook: steady growth expected, but widening deficit and headwinds loom

Ukraine’s economy is projected to continue growing modestly over the next two years, but economists warn that deep structural challenges and external imbalances will remain persistent. The Institute for Economic Research, together with the German Economic Team, forecasts that real GDP will expand by 2.1 % in 2026 and accelerate to 2.6 % in 2027, with private consumption and investment activity driving much of this momentum.

Analysts say the recovery reflects continued resilience in domestic demand, even as international trade dynamics strain the external position. The current account deficit is expected to widen markedly, rising from 16.2 % of GDP in 2025 to 20.8 % in 2026, and further to 21.5 % in 2027. This deterioration is attributed to stagnant exports alongside a continued rise in imports**, particularly of energy, industrial inputs and reconstruction-related goods.

Economists describe the trade outlook as one of the key risks for Ukraine’s macroeconomic stability. According to data released this week, both exports contracted in recent periods while imports climbed sharply, pressing the trade and current account balances.

Inflation is expected to remain elevated but trend lower over the forecast horizon. The average inflation rate is projected at 6.1 % in 2026 and 5.7 % in 2027, with year-end inflation of 6.2 % and 5.5 % respectively. Analysts say price pressures will be tempered by generally weak consumer demand and the Ukrainian government’s decision to postpone planned increases in household gas and heating tariffs for another year, extending a moratorium originally due to expire in late 2025. Lower global oil prices in 2026 are also expected to help limit energy costs.

The outlook comes amid broader global economic uncertainty, with ongoing war-related constraints on production, investment and infrastructure in Ukraine. National economic authorities have repeatedly emphasized that long-term recovery will hinge on structural reforms, reconstruction investment and continued external support.

Reflecting this, Oleksandr Marchenko, Deputy Minister of Economy of Ukraine, said in a recent government briefing: “While security challenges persist and external demand remains subdued, we are working to strengthen investment activity and diversify export markets. This is essential to sustain growth and improve Ukraine’s macroeconomic stability.”

Additional economic indicators paint a mixed picture. According to the European Commission’s latest forecast, labour shortages and high unemployment are expected to persist, even as labour market conditions gradually improve. Export recovery is anticipated later in the decade as agricultural output normalizes and trade conditions evolve, but import growth remains robust in the short term.

Market analysts also highlight domestic challenges such as infrastructure damage, labour force constraints and elevated government borrowing. The World Bank recently revised its growth forecast for Ukraine downwards, noting that weaker agricultural exports and high energy imports are weighing on overall economic performance.

In sum, while Ukraine is expected to sustain modest growth through 2027, economists warn that persistent external imbalances, inflation pressures and structural bottlenecks will require concerted policy action and sustained international support to ensure a more robust recovery.

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