KSE Institute has published the Q3 2026 edition of the Ukraine Macroeconomic Handbook, presenting a forecast for Ukraine’s economy through 2029 that covers the remainder of the full-scale war and the subsequent reconstruction and recovery period.

In the new edition, KSE Institute has revised its baseline assumption for the end of the full-scale war from late 2026 to the second half of 2027. Although the path toward a ceasefire and lasting peace remains highly uncertain and could accelerate under favorable military, economic, or diplomatic developments, a longer war is currently considered the more likely scenario.

This revision is not intended to suggest that such an outcome is inevitable, but to provide Ukraine’s partners with a realistic basis for assessing the country’s medium-term outlook and support needs. Despite the implementation of the Ukraine Support Loan, KSE Institute projects that Ukraine will require an additional $67.4 billion in financial assistance from its partners over 2027–29. A longer full-scale war will significantly increase defense and security spending, weigh on budget revenues, and delay access to market financing.

The war’s continuation into 2027 will have important implications for Ukraine’s macroeconomic outlook across all sectors of the forecast. The underlying current account deficit excluding grants will be $68.9 billion higher due to wartime needs and Ukraine Support Loan disbursements, resulting in higher imports, while exports and foreign capital inflows remain weaker for longer. 

Cumulative economic growth over 2026–29 will be 3.7 percentage points lower than previously expected. Average inflation over the forecast period will be 1.6 percentage points higher and even reach double digits at the end of 2026 and in early 2027 due to the strong supply-side pressure amid war-related destruction.

This will require a tighter monetary policy stance, with a significant potential for a temporary rise to 15.5% in October 2026, already becoming the baseline scenario. Continuous supply-side spikes will require a cautious stance from the NBU, and demand-pull inflation during the recovery period will continue to pressure the NBU to keep the KPR higher even when crediting needs are at their peak. 

Exchange rate depreciation pressures will be stronger than previously forecasted, with the hryvnia reaching 46.3 USD/UAH by the end of 2026, and rising to 49.9 by the end of 2028, with some appreciation afterward. The sustainability of the NBU’s exchange rate framework will remain dependent on continued external financing. A faster depletion of international reserves would limit the NBU’s room for intervention and could lead to a steeper depreciation path. However, under the baseline scenario with additional yet uncommitted financing, reserves will remain around $70 billion by 2029.

While the reclassification of the €90 billion Ukraine Support Loan reduces the headline budget and current account deficits, overall financing gaps remain unchanged. Securing additional external support, preferably in the form of grants or highly concessional financing, will be essential to preserve fiscal sustainability, avoid a destabilizing fiscal adjustment, and preserve reserve buffers. If the financing gap is fully covered through concessional loans, debt, including ERA liabilities, will rise above 100% of GDP by 2028 and ease only marginally in 2029. Thus, the form of support is of critical importance.

Without additional funding, Ukraine’s ability to defend itself against Russian aggression would be jeopardized, the authorities would be forced to resort to extraordinary measures to finance the budget, macroeconomic buffers would be depleted, and reconstruction would remain critically underfunded.

The post-war recovery will also be shaped by return migration, which may be later and smaller than previously assumed. Reskilling programs, more effective matching of workers and vacancies, and measures encouraging Ukrainians to return from abroad will therefore be essential to sustaining reconstruction-led growth.