Economic and Financial Situation in Ukraine: New NBU Forecast to 2027

Just a few hours ago, the NBU released a fresh July report with an updated forecast for 2025-2027.

A useful document for analysts, bankers, businesses and all Ukrainians interested in the economic future.

The report explains the NBU's vision in detail on more than 50 pages. Not just general forecasts or assumptions, but a detailed explanation of why our forecasts are what they are and why we see our monetary policy as such.

Given the considerable uncertainty about the duration of high security risks, this time we are publishing two forecast scenarios for 2026 and 2027. To provide a better understanding of our policy and outlook.

Before going into details, I'll make a disclaimer.

1. The NBU has no information on the duration and intensity of security risks in the future.

2. The baseline scenario assumes a slow return of the economy to normal conditions and takes into account the continued significant defense spending in 2026 (budget deficit at 19% of GDP, a slight decrease from this year's 22% of GDP). The reason for choosing this scenario as a baseline is the traditional conservatism of the NBU's positions.

3. The alternative scenario envisages a faster normalization of conditions compared to the baseline and, accordingly, more significant fiscal consolidation (reduction of the budget deficit to 13% of GDP in 2026).

A few conclusions of the report. Let me start with the baseline scenario.

▪️Інфляція will decline significantly by the end of 2025. In July, it may accelerate slightly, but in the following months it is expected to return to a steady decline – to 9.7% in 2025, 6.6% in 2026, and our target of 5% in 2027.

▪️Економіка will recover gradually. In 2025, the recovery will slow to 2.1% from 2.9% last year. In 2026, there will be a marginal acceleration to 2.3%. In 2027, a more significant growth rate (almost 3%) is expected due to a revival in private investment and consumption.

▪️Макрофінансова stability will be maintained. The higher fiscal deficit will be financed without issuing debt through international assistance and domestic sources. International reserves will remain adequate.

The alternative forecast scenario assumes a faster normalization of economic conditions, and thus higher growth rates: 3-3.5% per year in 2026 and 2027. The revival of private consumption and investment demand should offset the effects of budget cuts.

The inflation trajectory in the alternative forecast is close to the baseline scenario. Under this scenario, faster adjustments to utility tariffs are offset by lower core inflation due to lower production costs. Inflation is also expected to return to the 5% target in 2027. Thus, the easing of interest rate policy in both scenarios will be at roughly the same pace .

International reserves in both forecast scenarios also differ only slightly. With conditions normalizing more quickly, the lower structural foreign currency deficit in the private sector is expected to minimize the effects of the reduction in external financing. Consequently, the level of reserves under both scenarios will be sufficient to maintain the stability of the FX market.

Another tip is to familiarize yourself with the special topics. As always, they are relevant: convergence of food prices in Ukraine with the EU, anchoring of inflation expectations of enterprises, and the use of the instrument of currency intervention in the context of global turbulence.

Links to report .

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