KSE Institute published the July 2026 edition of its Ukraine Monthly Economic Update, covering developments and data for May–June 2026.

Ukraine’s goods trade deficit continued to widen rapidly. In January–May, goods exports totaled $16.6 billion, while imports reached $42.4 billion, bringing the cumulative goods trade deficit to $25.8 billion—48% higher than a year earlier. Exports rose by only 3%, with growth largely confined to agricultural products, whereas imports increased by 27%. Machinery and equipment recorded the strongest increase, driven by defense procurement, capital investment, and reconstruction demand.

External support remained limited through May, prompting the National Bank of Ukraine to use its reserves to bridge the financing gap through foreign-exchange interventions. International reserves declined to $45.7 billion in May. In June, Ukraine received $11.3 billion from international partners, including the European Union and the World Bank, lifting reserves to $51.3 billion. The hryvnia averaged UAH 44.7 per dollar in June, although it weakened to around UAH 45.1 per dollar early in the month. To contain pressure on the foreign-exchange market and smooth exchange-rate spikes, the NBU sold $5.1 billion—the largest monthly volume since December 2024.

In June, state budget general fund revenues amounted to UAH 542 billion, reaching 123.6% of the planned level. This strong performance was driven primarily by grant revenues, which exceeded the plan by UAH 120.9 billion. General fund expenditures totaled UAH 430 billion, resulting in a monthly surplus of UAH 112.8 billion. At the same time, the government raised UAH 38 billion through domestic borrowing and UAH 188 billion from external sources. Overall tax revenues broadly met the plan, while domestic VAT receipts remained weak, as large VAT refunds offset otherwise stable tax collection. In the second half of the year, the budget may come under renewed pressure from high defense and social spending, as well as continued dependence on support from international partners.

Headline inflation slowed to 7.2% year-on-year in June, down from 8.2% in May. The main factor was a seasonal decline in food prices, particularly for eggs, vegetables, sugar, and fruit. At the same time, core inflation increased to 8.1%, while manufacturing producer prices rose by 45.2% year-on-year. This indicates that earlier increases in fuel, logistics, and production costs may continue to pass through to retail prices. Once the seasonal decline in food prices fades, headline inflation may move back toward 10% and potentially exceed that level by the end of the year.

The National Bank of Ukraine kept its key policy rate unchanged at 15% for the third consecutive meeting. The current rate is considered sufficiently tight to support demand for hryvnia savings, contain pressure on the foreign-exchange market, and keep inflation expectations anchored. However, three of the eleven members of the Monetary Policy Committee voted to raise the rate, particularly in view of persistent underlying inflationary pressures. The banking sector remains resilient, while lending continues to expand: net corporate loans increased by 30% year-on-year, and net retail loans by 36%. At the same time, the real after-tax return on new term deposits has turned slightly negative, meaning that deposit income is no longer sufficient to fully offset inflation.

Industrial production stagnated in May, rising by just 0.3% year-on-year. Growth was concentrated in defense-related industries, while the production of wearing apparel, electrical equipment, and energy declined. Construction output fell by 17.8%, while the divergence between construction activity and construction-materials output points to inventory accumulation in the sector. Retail trade turnover rose by 10.9%, indicating that consumer demand remained resilient.