Ukraine has preserved macroeconomic stability despite a fourth year of full-scale war, but its growth prospects for 2026 have been sharply downgraded as expectations of a ceasefire fade, according to the European Bank for Reconstruction and Development.

In its latest Regional Economic Prospects report, the EBRD said real GDP growth accelerated towards the end of 2025, reaching 3.0% in the fourth quarter and delivering full-year growth of 2.0%. However, assuming the war continues throughout 2026, the bank now forecasts expansion of 2.5% this year, half the 5.0% it had projected previously under a ceasefire scenario. Growth is expected to rise to 4.0% in 2027.

“Supporting the country’s macroeconomic stability is significant, secured and largely front-loaded external financing,” the report said. “While the war continues to impose substantial human and economic costs, Ukraine’s authorities, businesses and partners have demonstrated strong capacity to stabilise the economy under unprecedented conditions.”

Kyiv School of Economics (KSE) recently reported that the €90bn EU loan approved in December will ensure Ukraine’s funding for the next two years. The European Commission (EC) is currently working on a mechanism for raising that money, a collective EU bond backed by Europe’s budget, and making the first distributions by April at the latest.

However, Ukraine’s economic performance in 2025 was marred by wartime constraints. Power shortages, weaker agricultural output and persistent labour shortages weighed on activity, while Russia’s attacks on infrastructure created logistical bottlenecks, the EBRD reports. The trade deficit widened as grain exports declined and temporary European Union trade preferences expired in June. Even so, the EBRD noted that many sectors continued to adapt, highlighting the resilience of firms operating under sustained disruption.

Growth momentum strengthened late in the year. After expanding by just 0.8% in the first half of 2025, the economy grew by 2.1% year on year in the third quarter and 3.0% in the fourth.

Inflation, which had been elevated at the start of 2025, fell sharply in the second half as tighter monetary policy and easing cost pressures took effect. By January 2026, inflation had slowed to 7.4%. The National Bank of Ukraine maintained a restrictive stance through most of 2025 before cutting its policy rate by 50 basis points in January.

Fiscal support remains central to stability. Ukraine’s large budget deficit is fully financed by external partners, allowing the government to maintain public services and defence spending. The EBRD said more than €110bn in committed external financing for 2026–27 should help contain short-term risks.

The bank cautioned that while 2.5% growth is its baseline forecast under continued conflict, “an early 2026 peace agreement would substantially improve the outlook”. Persistent energy shortages, labour constraints and agricultural weakness remain key risks.

The EBRD, Ukraine’s largest institutional investor, has provided more than €9bn in financing since February 2022, supporting energy security, infrastructure, food security, trade and the private sector as the economy adjusts to prolonged war.