In its April 2025 Ukraine Macroeconomic Handbook, KSE Institute highlights the stability of the overall macroeconomic situation, which has been made possible due to successful adaptation, sound policy management, as well as continued and significant financial support from international partners. KSE projects GDP growth to reach around 3% in 2025 and accelerate in 2026-27 after the end of the war. Productivity growth through investments is key for a robust post-war recovery. Critically important for stable macroeconomic fundamentals are the $50 billion provided by the G7 under the ERA mechanism, which is based on proceeds from frozen Russian sovereign assets. Overall, Ukraine will receive around $92 billion in foreign grants and loans in 2025-27, more than $58 billion of which are expected this year.

Partners’ support will allow Ukraine to finance the budget and build up reserves. External loans totaling more than $72 billion will be attracted over 2025-27 and finance a significant share of the budget deficit. The return of foreign investors to the domestic debt market in 2026-27 and Ukraine’s ability to issue Eurobonds again in 2027 (or earlier) will also have a positive impact. The deficit is expected to decline from 16.0% of GDP in 2025 to 10.2% in 2026 and 6.4% in 2027 as revenues are projected to grow despite a significant reduction in grants after 2025. At the same time, budget expenditures will decrease by about 15% after the war as defense and security spending can be gradually reduced. Foreign assistance also positively impacts balance of payments dynamics and will allow for $17 billion in additional reserves by 2027, bringing the total to close to $60 billion (or a comfortable level of 6.5 months of imports).

Inflation is expected to start slowing by mid-2025 as its main drivers—higher electricity costs, rising wages, and producer prices—weaken and the NBU’s tighter monetary policy will unfold its full impact. After peaking at around 14% in Q2 2025, KSE projects inflation to decline to 8.6% in Q4 2025 and approach the central bank’s 5% target by the end of 2027. The NBU will most likely continue its tight monetary policy until inflation falls below 10% in the fall of 2025. Interventions in the foreign exchange market, made possible by foreign assistance inflows, will keep the Hryvnia broadly stable over the forecast period, floating around 42-46 UAH/USD.

Several key risks remain or have emerged since the January forecast. First, one key assumption underlying the report is that the full-scale war will come to an end in 2025. A continuation of the war in 2026 would seriously impede Ukraine’s economic recovery, require significantly higher spending, and increase damages and reconstruction needs. Second, investments needed to ensure productivity improvements and robust economic growth amount to $300 billion over the coming decade. An underfunded recovery would significantly slow down Ukraine’s convergence to EU income levels. Third, as a large share of foreign assistance is now expected to be paid out this year, macroeconomic buffers and budgetary resources need to be preserved for 2026-27. Finally, new important risks that have emerged in recent months are the escalation of the trade war between the US and the rest of the world and the likely end of the EU’s trade measures for Ukraine. Taken together, these factors could have a significant negative impact on trade, investment, and economic activity in Ukraine.