Ukraine's economy shrank 2.4% year-on-year in September as Russian strikes hit industry and transport, Kyiv's Institute for Economic Research and Policy Consulting (IER) estimated on October 20.

The decline deepened from August, which the IER revised to a 1.9% contraction on new agricultural data. In its monthly economic monitor the institute estimated that real GDP was lower over the first nine months of 2026 than a year earlier, and it now expects a full-year fall of about 0.5%, citing a further deterioration in October and a higher base.

The numbers mark a sharp turn for an economy the IER still had growing 1.3% y/y in July. Kyiv-based investment group ICU abandoned its growth forecast on October 14 and now sees GDP shrinking 0.6% this year and 1.9% in 2027, the worst performance since the first year of the full-scale invasion.

Transport took the heaviest blow, with value added down 20% in September. Restrictions on Black Sea ports and problems on the railways are pushing freight onto the roads, the IER said, but hauliers are short of drivers and trucking costs far more than shipping by sea. Ukraine's own exports have been caught in the drone war on ports, with traffic through the three Odesa region seaports down by nearly 95% in August and September.

Output in the extractive industry fell 12.3%, mainly on lower iron ore production, with natural gas output making up part of the gap. Manufacturing dropped 7%, dragged down by metallurgy after Russian missiles and drones shut large steel plants. Defence production limited the fall, though the IER noted that arms makers lack long-term contracts.

Agriculture contracted 5.6% after a fall of about 12% in August. With exports constrained, farmers are storing grain in bags, silos and mobile elevators, and they have sown less land, which the IER warned could hurt the 2027 harvest. Trade fell 5.5% on lower exports and the destruction of warehouses, and electricity and gas distribution was down by about 11%.

The institute warned that the closure of metallurgical plants and changes in how large retailers operate could cut employment and the wage bill. "High uncertainty leaves the possibility of further revisions to calculations," it said. The IER figures are analytical estimates; the State Statistics Service publishes official GDP data quarterly.