KSE Institute released the January 2026 edition of the Ukraine Monthly Economic Update, outlining recent macroeconomic trends amid the full-scale war. Despite substantial external support, economic dynamics toward year-end remained subdued due to pressures on the energy system, the foreign exchange market, and public finances.

External imbalances continued to deepen, with the trade deficit reaching $44.6 billion in January–November, reflecting weak exports alongside a sharp increase in imports of machinery and equipment for defense, investment, and energy system repairs. At the same time, sizable external inflows helped cushion these pressures, lifting international reserves to a record $57.3 billion in December.

The hryvnia continued to depreciate gradually, reaching around UAH 42.2 per USD. Devaluation expectations picked up toward the end of the year, while NBU interventions intensified, pointing to elevated pressure in the FX market.

Fiscal conditions deteriorated markedly in December, as record-high budget expenditures combined with lower-than-expected revenues. The general fund deficit reached UAH 327.6 billion, underscoring the need for timely external financing amid rising debt-servicing costs.

Inflation slowed faster than expected, to 8.0% year-on-year in December. Contained food prices and easing underlying pressures supported the decline, although higher fuel costs and the risk of renewed energy disruptions remain potential upside risks.

Economic activity weakened toward year-end. Industrial output contracted sharply in November due to losses in the mining sector and severe energy supply disruptions caused by intensified Russian attacks. Construction and transport also remained under pressure.

Key risks include worsening energy conditions, persistent exchange-rate imbalances, continued fiscal reliance on external support, and uncertainty about future financing under partner programs. The macro-fiscal implications of structural reforms — including the draft Labor Code — also remain an important consideration.