Economic Growth Predicted for War-Torn Ukraine
Ukraine’s economic prospects could improve significantly with a 5% GDP expansion next year, if a ceasefire is established, according to the European Bank for Reconstruction and Development (EBRD). However, the foundation for reconstruction is firmly tied to achieving lasting peace. The EBRD has played a meaningful role, investing $6.2 billion in projects over the three-year conflict period, with an eye on future reconstruction support.
The EBRD forecasts a 3.5% GDP growth for Ukraine in the current year, as the nation grapples with inflation exacerbated by Russian strikes on its energy infrastructure. The projected 5% growth in 2026 is, however, contingent on the cessation of hostilities. EBRD’s Chief Economist, Beata Javorcik, emphasized the bank’s readiness to assist in rebuilding Ukraine, once negotiations lead to peace.
Despite three years of conflict, Javorcik praises Ukraine for maintaining macroeconomic stability, a notable accomplishment in dire circumstances. However, she points to the historical data showing that many countries continue to face economic challenges 25 years after a war, indicating that reconstruction success is not guaranteed without lasting peace.
The prospects of peace seem distant as key powers, including the US, entertain talks with Moscow without Kyiv’s involvement, hinting at potential concessions to Russia. Meanwhile, the international community, including the G20 finance ministers meeting in South Africa, calls for a just and durable peace, emphasizing its implications for both Ukraine and the global economy.
The EBRD’s recently released forecasts point to downward adjustments across central and eastern European countries, now expecting 3.2% average GDP growth in 2025, reflecting the increased defence spending and economic uncertainty stoked by geopolitical tensions. The revision underscores a broader concern over the fading peace dividends and their detrimental effects on investments critical for long-term growth, including education and infrastructure.
Analyzing the impact of potential tariffs, such as America’s proposed 10% across-the-board levy, the EBRD suggests while direct effects on its region might be minimal due to limited exports to the US, indirect impacts could be far-reaching, potentially reducing GDP in affected economies.
