By Kateryna Mykhailova

Copyright kyivpost

The European Bank for Reconstruction and Development (EBRD) revised Ukraine’s economic forecast for Ukraine’s GDP growth in 2025 downward to 2.5% from its earlier estimate of3.3%, attributing the downgrade to uncertainty over the course of Russia’s full-scale war, pressure on energy infrastructure, and weak export performance.

Ukraine’s exports weakened due to declining harvest volumes as a result of 2025 April frosts and 2024 summer drought, while the European Union brought an end to tariff-free trade on 36 categories of Ukrainian goods within the Autonomous Trade Measures (ATM). On top of higher imports, caused by Russia’s full-scale invasion, it created a $7.5 billion higher trade deficit in the first seven months of 2025.

But despite these factors, EBRD left its 2026 forecast unchanged at 5%, assuming a ceasefire and benefits from post-war reconstruction, The Bank’s new Regional Economic Prospects report says.

“Ukraine’s economic outlook is highly uncertain, depending on the war’s course, energy security and continued international support,” the report says.

Ukraine’s economy grew by 0.9% year on year in the first quarter of 2025, driven by consumer spending and investment in critical infrastructure. However, labour shortages, energy damage and weak agricultural exports continued to weigh on the economy.

In the second quarter of 2025, Ukraineʼs GDP rose by 1.7%, the Institute for Economic Research and Policy Consulting (IER) estimated.

The IER noted that GDP growth was supported by metallurgy, construction materials, and light manufacturing (clothing and footwear), while agriculture, coal mining, and oil processing weakened.

Unemployment fell to 12%, its lowest since the start of Russiaʼs full-scale invasion, but civilian workforce recruitment remains difficult due to mobilization and emigration, the report says.

Ukraine eased the travel ban for men aged 18 to 22 on Aug. 26, but it is unclear at present how this is affecting the job market, NBU governor Andriy Pyshny said during an online briefing with journalists on Sept.11.

“We are attentively following the discussion and messages on what effect this decision has… If the impact is substantial, we will include it in our forecasts. But we are not expecting any drama,” Pyshny told Kyiv Post at the briefing.

Business is suffering less from the lack of employees, but the demand remains high, Nikolaychuk added.

“We see the tendencies for vacancies decrease and businesses are looking for fewer employees, while the CV quantity is growing. The salaries have increased over the years, and it helps new categories to enter the labor market: the retired, students, individuals with disabilities,” Nikolaychuk said during the briefing.

The fiscal deficit is set to reach 22% of GDP this year. Ukraine expects about $40 billion in external financing, mainly from the EU, G7 partners using frozen Russian assets, and the IMF, the EBRD report says.

The National Bank of Ukraine (NBU), forecast in its baseline scenario that Ukraine will receive $35 billion in 2026, and $30 billion in 2027. Ukraine has not yet found sources to finance the remaining $12.7 billion for Ukraine’s needs in 2026, and $29 billion for 2027, Deputy NBU Governor Sergiy Nikolaychuk previously said presenting the macroeconomic forecast for Ukraine until the end of 2025.

Inflation slowed from 15.9% in May to 13.2% in August, though food, utilities and wages keep prices high. The central bank has kept its policy rate at 15.5 percent since March to contain inflation, the report says.

Fruits and vegetables – one of the key contributors to higher inflation in Ukraine over the last year alongside war-caused energy costs and labor shortage – decelerated by 10.2% and 12.7% respectively in August compared to the previous month.

EDBR forecast for Ukraineʼs GDP growth remains the most optimistic

In September, the IER also lowered Ukraine’s real GDP growth forecast for 2025 from 2.9% to 2%. The main reasons were weak results in the agricultural, transportation, and industrial sectors.

Ukraineʼs National Bank predicts that the economic recovery will be slower than last year – real GDP will grow by 2.1% in 2025, the Bankʼs inflation report for July says.

In its April 25 Regional Economic Outlook for Europe press conference, the International Monetary Fund (IMF) aslo downgraded real GDP growth for Ukraine to 2.0%, marking a 0.5% decrease from its October 2024 projection.