The ICU Investment Group has lowered its forecast for Ukraine’s real gross domestic product (GDP) growth in 2026 to less than 1% (0.8% expected) compared to its previous estimate in December of 1.2%.
“Weak economic growth will be the new norm in the coming years unless the security situation improves significantly,” according to ICU’s updated macroeconomic forecast.
ICU noted that private household consumption and government investment in military projects remain the main pillars of the economy, however, the strength of these components will gradually weaken, so the investment company lowered its GDP growth forecast for the current year from 1.2% in the December macro forecast to 0.8% in the June update.
According to the company’s press release, GDP contraction in the first quarter of 2026 is estimated at 0.5%, which is slightly below most estimates; ICU believes that growth potential in the medium term remains quite limited.
According to the press release, analysts have downgraded the inflation forecast for 2026 to 9–10%, compared to previous expectations of around 7%. This trend is attributed to the primary and secondary effects of the crisis in the Middle East and the war in Iran on global consumer prices.
ICU considers the current tightness of monetary policy sufficient to offset temporary inflationary pressures, so the probability of an NBU policy rate hike by year-end is estimated at no more than 50% (the rate forecast for 2026 is 15%).
Due to a significant increase in imbalances in the foreign exchange market and a rise in the NBU’s currency sales interventions to $18.1 billion over the first five months of this year (compared to $14.3 billion during the same period last year), the investment group expects the pace of the hryvnia’s depreciation to accelerate. For the full year, the increase in interventions compared to last year’s figure could amount to $6–7 billion, and their total volume could approach $42–43 billion, leading to a revision of the exchange rate forecast for the end of 2026 to 45.8 UAH/$1 compared to the previous 45.0 UAH/$1.
At the same time, the budget deficit in 2026 (projected at 21% of GDP excluding grants) will be fully covered by foreign aid, allowing the Ministry of Finance to reduce domestic debt for the first time since the start of the full-scale war. Approval of the EU’s Ukraine Support Loan (USL) will enable the NBU to maintain international reserves at $60 billion by year-end.
According to the updated table of macroeconomic indicators, ICU also forecasts nominal GDP of $229 billion, a current account deficit of 18% of GDP, and an increase in public debt to 107% of GDP by the end of 2026. The baseline assumption of the forecast is that security risks will not change fundamentally in the medium term: a peace agreement will not be signed, but the enemy will not make any new territorial gains either.
As reported, the National Bank lowered its GDP growth forecast for this year to 1.3% from 1.8% in April, but kept it at 2.8% for next year, and expects it to accelerate to 3.7% in 2028. Regarding inflation, the NBU revised its forecast for 2026 downward in April from 7.5% to 9.4%, and for 2027 from 6% to 6.5%, and expects it to decrease to 5% as early as 2028.
The government’s forecast, incorporated into the 2026 state budget, currently projects 2.4% growth, but Economy Minister Oleksiy Sobolev has announced plans to revise it downward.
The EBRD, in turn, has lowered its forecast for Ukraine’s GDP growth in 2026 from 2.5% to 2.2%; the International Monetary Fund (IMF) expects Ukraine’s GDP to grow by 2% in 2026, while the World Bank forecasts growth of 1.2%.
