The Ukrainian economy is facing another serious test. While economic activity is weakening, prices continue to rise. Furthermore, ongoing Russian attacks, financing issues and labour shortages are raising questions about how quickly the country can recover after the war.
In 2026, Ukraine may enter a period of stagflation—a situation where the economy stagnates or declines while prices continue to rise. According to the October forecast by the National Bank of Ukraine (NBU), the country's real gross domestic product (GDP) is expected to fall by 0.4% in 2026, with inflation reaching 12.5% by the end of the year. Yet in its previous forecast, the central bank had anticipated economic growth. The worsening situation is primarily driven by ongoing Russian attacks on energy, industrial and transport infrastructure. Maritime transport restrictions, which complicate Ukrainian exports, are also a significant problem. According to the NBU, metallurgical and mining enterprises have suffered the greatest losses, but other industrial sectors, trade and agriculture are also feeling the negative consequences.
Furthermore, damage to production facilities and transport links does not merely mean lower output. At the same time,companies face rising costs for energy, transport and operational security. Part of production is thus becoming more expensive, while sales opportunities remain limited. Rising prices subsequently also affect households, whose everyday expenses are increasing. The central bank is therefore faced with a difficult task: curbing inflation without further weakening economic activity. Nor do forecasts for 2027 present a clear picture. The NBU expects a slight economic recovery of 0.4% and a slowdown in inflation to 7.3%. However, this development assumes an improvement in logistical conditions, the restoration of damaged infrastructure and the continuation of international financial support.
A more pessimistic scenario is presented by the KSE Institute, which predicts a further 0.6% decline in GDP for 2027.According to its estimates, between 2026 and 2029, Ukraine will lack approximately $99.5 billion for state budget financing, even after taking into account already pledged assistance. This scenario assumes the end of large-scale combat in the second half of 2027. If the war were to continue longer, financial needs could rise even further. In addition to the immediate consequences of the war, another problem is becoming increasingly prominent: labour shortages. After the fighting ends, Ukraine will need people to rebuild industry, construct infrastructure and run public services. However,many have left the country during the war, and it is uncertain how many will return.
According to a demographic analysis by the KSE Institute, at the beginning of 2026, approximately 29.4 million people lived in territories controlled by the Ukrainian government, while another 6.5 million Ukrainians were abroad, excluding Russia and Belarus. Under the baseline scenario, the number of people who are working or actively looking for work could fall from 12.9 to 11.9 million by 2030. This means that economic recovery will not depend solely on the availability of financing. Ukrainian businesses will have to increase productivity despite having fewer workers. According to the KSE, to achieve the projected economic results, labour productivity between 2027 and 2029 would have to grow by an average of 5.1% annually, which significantly exceeds the pre-war pace.
Ukraine is thus facing two interconnected challenges. In the short term, it needs to maintain the functioning of the economy, stabilise prices and secure state financing. In the long term, however, it will be crucial whether it can restore production capacities, attract investment and create conditions for the return of its inhabitants. Even if the war were successfully ended, the mere cessation of hostilities would not yet guarantee a rapid economic recovery.
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