Ukrainian economic stability and global instability: KSE Institute assesses the risks
2 May 10:56
Ukraine’s economy remains stable. At the same time, the risks associated with global instability and the situation on the labor market are growing. This is stated in the April macroeconomic review by the KSE Institute, "Komersant Ukrainian" reports.
What are the key economic benchmarks?
Experts predict GDP growth of about 3% annually and acceleration of its growth in 2026-27 after the end of the war. A key factor for a sustainable post-war recovery will be productivity growth driven by investment.
In total, Ukraine will receive about $92 billion in foreign grants and loans in 2025-27, of which more than $58 billion is expected this year. The support of partners will allow Ukraine to finance the budget and accumulate reserves.
The deficit is expected to decline from 16% of GDP in 2025 to 10.2% in 2026 and 6.4% in 2027, as revenues are projected to grow. Inflation will start to slow by mid-2025, as its main drivers – higher electricity costs, wage growth, and producer prices – will weaken, and the NBU’s tighter monetary policy will have a significant impact. After peaking at around 14% in Q2 2025, the KSE Institute forecasts inflation to decline to 8.6% in Q4 2025 and approach the central bank’s 5% target by the end of 2027.
The NBU will continue its tight monetary policy until inflation falls below 10% in the fall of 2025. Interventions in the foreign exchange market, made possible by the inflow of external assistance, will ensure the overall stability of the hryvnia exchange rate in the range of 42-46 UAH/USD over the forecast period.
What are the key risks that will affect the situation?
One of the key assumptions underlying the report is that the full-scale war will end in 2025. A continuation of the war into 2026 would seriously impede Ukraine’s economic recovery, require significantly higher spending, and increase damages and recovery needs.
Second, to increase productivity and ensure sustainable economic growth, Ukraine needs to attract $300 billion in investment over the next ten years. An underfunded recovery will significantly slow down Ukraine’s convergence with EU income levels.
Third, as a significant portion of external assistance is expected to be received this year, it is important to preserve macroeconomic reserves and budgetary resources for 2026-2027.
Finally, new important risks that have emerged in recent months are the escalation of the trade war between the US and the rest of the world, as well as the likely end of the EU’s special trade regime for Ukraine. Together, these factors could have a significant negative impact on trade, investment, and economic activity in Ukraine.
Businesses cautiously assessed their performance in April
Business representatives assessed their own economic performance at a level close to neutral. This is evidenced by the index of business activity expectations calculated by the National Bank: in April 2025, it amounted to 49.4, while in March it was slightly higher at 51.8, and in April 2024 it was even higher at 52.3.
The reasons for these estimates include a significant deterioration in weather conditions, as well as continued uncertainty about the further course of hostilities, rising business costs for raw materials and labor, accelerating inflation, the weakening of the hryvnia against the euro, and a shortage of qualified personnel.
At the same time, positive factors included steady consumer demand, international financial assistance, and a better-than-expected situation in the energy sector.
Industrial enterprises retained the most optimistic assessment of their performance among all sectors, thanks to sustained consumer demand, increased production, and improved logistics: the sectoral index in April was 51.8, compared to 53.1 in March 2025.
Trade companies also positively assessed their current performance due to a sufficient supply of goods and steady domestic demand. Construction firms were cautious in their assessment of their current economic performance, given the significant deterioration in weather conditions. Services companies lowered their expectations and maintained the most restrained assessments of their business activity among all sectors, given high security risks and a shortage of qualified personnel: the sectoral index was 46.3 in April, compared to 48.8 in March 2025.
Employment estimates softened. Construction companies were set to increase their staff, while trade companies did not expect any changes. Instead, managers of industrial and service companies expected a decrease in the total number of employees.
