The Ukrainian Institute for the Future has completed work on the annual “Forecast of Ukraine’s Economy” for 2026.

According to our forecast, Ukraine’s economy in 2026 will maintain conditional stability due to large-scale external support, but this stability is one of exhaustion rather than development, effectively secured by the growth of public debt. Structural imbalances are deepening, and resources are concentrated on survival rather than on building the foundation for future growth. Without systemic changes in economic management, fiscal policy, and the use of existing opportunities, Ukraine risks losing its chance for transformation after the war.

The fourth year of the full-scale war poses unprecedented economic challenges for Ukraine. The economy is operating under record imbalances: according to our preliminary estimates, the budget deficit will reach 19.4% of GDP in 2025, the trade balance deficit will be – 26.8% of GDP, and public debt will exceed 100% of GDP. The demographic crisis is intensifying, the labor shortage has become the primary constraint on growth, and inflation is slowing but remains significantly above the NBU’s target.

We consider it important to analyze Ukraine’s predominantly negative economic trends, conduct a scenario analysis of Ukraine’s future, and develop an economic forecast within these scenarios as a realistic alternative to forecasts from state institutions.

Decisions made today will determine whether Ukraine can turn wartime challenges into opportunities or whether the country will enter a prolonged period of stagnation and exhaustion.

Key conclusions

Demographic catastrophe. Net population outflow from Ukraine since the start of the full-scale invasion amounts to approximately 7 million people. In 2026, an additional 200,000 people are expected to leave. Labor shortages have become the primary constraint on production: 46% of enterprises identify them as a key problem. This creates intense pressure on wage growth (according to our forecast, +18.3% in nominal terms in 2026) without a corresponding increase in labor productivity.

Inflation remains high. Under our baseline scenario, inflation at the end of 2026 will amount to 9%. The main pro-inflationary factors are non-monetary: labor shortages, rising tax burden, and energy-sector problems that affect production costs. Inflation expectations among households and businesses remain elevated, at approximately 11%. Under these conditions, the NBU is likely to adhere to a policy of cautious monetary easing and to maintain the current policy rate for longer than previously planned.

Fiscalization is intensifying. The budget deficit in 2026, according to our estimates, will reach 21% of GDP or USD 48 billion (including grants in budget revenues). Despite sufficient external financing to cover the deficit, the state continues to increase the tax burden, which, in our view, will further shadow the economy rather than increase revenues.

Debt trap – the price of conditional macroeconomic stability. According to our forecast, public debt under conditions of continued hostilities will reach 116% of GDP in 2026 or USD 258 billion – a historical maximum for Ukraine. Debt servicing costs will rise to 4.2% of GDP. 68% of public debt is denominated in foreign currency, which creates the risk of a sharp increase in the debt burden in hryvnia terms in the event of a devaluation. High debt levels limit opportunities for development investment and create the risk of a future debt crisis.

Record trade balance deficit. Under the baseline scenario, the trade balance deficit in 2026 will reach USD 60 billion or 26.4% of GDP. Export potential is constrained by the destruction of logistics infrastructure and production capacity, and by rising production costs stemming from various factors, which reduce the competitiveness of Ukrainian products in foreign markets. At the same time, imports continue to grow at a rapid pace. For now, the deficit is covered by external assistance, but in the medium term, this creates a risk of sharp devaluation.

Pre-election political economy. 2026 may become a year of electoral preparation. According to surveys conducted in September 2025, 22% of the population supports elections after a ceasefire (compared to 9% in March 2025). Pre-election periods in Ukraine are traditionally characterized by weakened fiscal discipline, populist initiatives, and a slowdown in structural reforms, which have a negative impact on the economy.

DefTech – unrealized potential. Over the first three quarters of 2025, defense industry production increased 2.5 times, while the “civilian” industry is stagnating. Approximately 900 defense industry enterprises have the capacity to produce goods worth USD 35 billion but are utilized, according to various estimates, at only 30–50% due to insufficient effective domestic demand, while exports remain closed to Ukrainian producers. Allowing exports of defense products could generate several billion dollars in additional export revenues.

Four scenarios for 2026:

Scenario 1. “Illusion of recovery” (probability 10%) – hostilities stop, assistance is provided in full, reconstruction begins, but real growth rates remain moderate due to bureaucratic barriers and corruption.

Scenario 2. “War without end” (probability 60%) – hostilities continue, assistance is sufficient to maintain macroeconomic stability, but the economy gradually weakens due to resource exhaustion.

Scenario 3. “State collapse” (probability 10%) – hostilities continue, assistance sharply declines, and the economy enters a phase of uncontrolled crisis.

Scenario 4. “Cold peace” (probability 20%) – hostilities stop, but assistance is reduced, and Ukraine becomes a “grey zone” with a high level of uncertainty.

Forecast under the baseline scenario (war continues, assistance provided in sufficient, planned volumes):

• Real GDP growth: +1.2% (slowdown from +1.6% in 2025).
• Nominal GDP: USD 227 billion (+8%).
• Inflation: 9% (December to December).
• Average annual exchange rate: 44.0 UAH/USD.
• Budget deficit: 21% of GDP.
• Public debt: 116% of GDP.
• Trade balance deficit: USD 60 billion (26.4% of GDP).

Structure of the research:

Section I. Global economic trends in 2026

Section II. Trends of Ukraine’s economy in 2026

Section III. Scenarios for the development of Ukraine’s economy in 2026

Section IV. Forecast of Ukraine’s macroeconomic indicators for 2026

Purpose of the research

To analyze key global and domestic economic trends, model possible scenarios for the development of Ukraine’s economy in 2026 and produce forecasts of the main macroeconomic indicators.

Object of the research

Global economic trends and forecasts.

Ukraine’s economy under conditions of an ongoing war, global economic transformations, and internal structural imbalances, and their impact on macroeconomic stability.

Subject of the research

Dynamics of Ukraine’s main macroeconomic indicators.

Factors determining the trajectory of the country’s economic development.

Risks and opportunities for economic growth under conditions of uncertainty.

Scenarios of development depending on the military situation and the volume of external assistance.

What was done in the course of the research

• Global economic trends were analyzed, including trade wars and fragmentation of the global economy, inflation dynamics and monetary policy of leading central banks, trends in global debt burdens, growth in defense spending worldwide, and developments in commodity markets.
• Key trends in the Ukrainian economy were examined: the demographic crisis and labor shortages; inflationary processes and their structural causes; fiscalization of the economy and the rising tax burden; public debt dynamics; the widening trade balance deficit; the political economy of the pre-election year; and the potential of the DefTech sector.
• Four scenarios for economic development in 2026 were modeled depending on the military situation and the volume of external assistance.
• Macroeconomic indicator forecasts were calculated for two scenarios.

Methodologies used

• Statistical analysis – processing and analysis of data from the State Statistics Service of Ukraine, the National Bank of Ukraine, the Ministry of Finance, and international financial organizations.
• Scenario analysis – modeling four possible scenarios for the development of Ukraine’s economy in 2026, depending on key uncertainty factors (continuation/cessation of hostilities, volumes of external assistance).
• Expert assessment – determination of probabilities of scenario realization based on analysis of the current situation and trends.
• Comparative analysis – comparison of forecasts of international organizations (IMF, OECD, World Bank, etc.).
• Macroeconomic modeling – construction of an economic model to forecast key indicators.
• Content analysis – research and analysis of information from open sources on global and Ukrainian economic trends.

Main types of sources used

• Official data sources in Ukraine (State Statistics Service, National Bank of Ukraine, Ministry of Finance, Ministry of Economy, State Migration Service, etc.).
• International financial organizations (IMF, World Bank, OECD, European Bank for Reconstruction and Development, etc.).
• International research centers (SIPRI, Peterson Institute, Janes, IIF, etc.).
• Industry associations and analytical centers (Ukrmetallurgprom, GMK Center, Ekonomichna Pravda, etc.).
• Legislative and program documents of Ukraine.
• Other open data and media.

The presentation can be viewed below ⬇️

The study іs produced by NGO «Ukrainian institute of the future» with the support of the Askold and Dir Fund as a part of the the Strong Civil Society of Ukraine – a Driver towards Reforms and Democracy project implemented by ISAR Ednannia, funded by Norway and Sweden. The contents of this publication are the sole responsibility of NGO «Ukrainian institute of the future» and can in no way be taken to reflect the views the Government of Norway, the Government of Sweden and ISAR Ednannia.