According to the baseline scenario of the NBU’s forecast, inflation will decline to 9.2% at the end of the year and will continue to move toward its 5% target, which it will reach in 2027. Economic growth will slow to 1.9% this year and will slightly accelerate to 2%–3% in the years ahead.
The baseline scenario of the NBU’s forecast assumes that economic conditions will gradually normalize. It takes into account the consequences of escalated shelling and destruction, an additional increase in defense spending in 2025, as well as the need for significant amounts of external financing over the forecast horizon.
The detailed analysis and macroeconomic forecast can be found in the quarterly Inflation Report of October 2025.
Inflation to gradually slow to 5% by end-2027
The slowdown in inflation in the coming months will be primarily ensured by an ample supply of food. Over the next three quarters, vegetable prices will be lower than last year. A higher grain harvest than a year ago will restrain further increases in prices for flour and processed foods. This will slow the rise in feed and meat prices as well.
The deceleration of price growth will also be facilitated by the NBU’s monetary policy measures to maintain households’ interest in hryvnia savings instruments and the sustainability of the foreign-exchange market. To this end, the NBU will maintain relatively tight monetary conditions over the forecast horizon.
On the other hand, a number of factors will restrain the decline in inflation. Those include an increase in power shortages and risks of blackouts, as well as high rates of growth in administered prices within the forecast horizon.
Based on the totality of these factors, the NBU’s forecast has inflation falling gradually to 9.2% in 2025, 6.6% in 2026, and the 5% target by the end of 2027.
GDP growth to pick up in coming years while staying subdued due to fallout from war
The NBU has revised its GDP growth forecast for 2025 down to 1.9% due to the destruction of infrastructure and gas extraction capacities and worse-than-expected Q2 results. The impact of these factors is only partially offset by the effects of high budget expenditures. GDP growth this year will be driven by robust consumer demand, accommodative fiscal policy, and agriculture’s revival in H2 2025.
In 2026, economic recovery will remain restrained (2%) because of security risks and power failures. Going forward, GDP growth is expected to accelerate moderately to 2.8% in 2027 on the back of larger harvests and increased investments in reconstruction projects and the defense sector. Meanwhile, the shortage of labor will be a drag on recovery within the forecast horizon.
Demand for workers to remain robust, underpinning lower unemployment and higher wages
This year, the situation around the search for qualified personnel has improved somewhat, but remains tense. With demand in the labor market running high, unemployment is seen to gradually moderate to about 11% in 2025, 10% in 2026, and 9% in 2027. The pace of wage growth will edge lower compared to last year, but will continue to outrun inflation. According to the NBU’s forecast, real wages will gain about 6% in 2025 and 4%–5% annually in 2026–2027.
International assistance to come in sufficient volumes to ward off monetary financing of budget deficit
As defense needs expand, the NBU has revised its budget deficit assumption for 2025 to 25% of GDP. A narrowing of this indicator in the years ahead will be gradual due to the need to support defense capabilities and reconstruction. The budget deficit is anticipated to shrink to 19% of GDP in 2026 and 14% of GDP in 2027.
As before, substantial international financing will be the primary factor making it possible to cover the significant budget deficit. The NBU assumes that Ukraine will receive USD 51.5 billion in 2025, over USD 45 billion in 2026, and USD 39 billion in 2027. This will keep international reserves at an adequate level to ensure the FX market continues to be sustainable. Reserves are seen to grow to USD 53.6 billion before this year is out, to USD 52 billion in 2026, and to over USD 59 billion in 2027.
On top of revised macroeconomic forecasts, October’s Inflation Report features multiple boxes:
- Regional Features of Inflation in Ukraine
The inflation rates that the NBU and the government use to shape their policies are the result of averaging inflation across regions. However, inflation differences from region to region do significantly affect macroeconomic processes. Especially when those differences rise, primarily in the services segment, which is sensitive to local conditions.
Since the full-scale invasion, the geographical heterogeneity of prices in Ukraine has grown large enough to matter. The shelling and damage rates, power outage schedules, and frontline-area supply chain disruptions are all region-specific and have had their effects, as have changes in consumer demand, capital levels, and resources driven by internal and outbound migration.
Monitoring regional price developments is important for timely detection of possible factors underlying headline inflation and for understanding the country’s macroeconomic processes. Incorporating such data into macroeconomic analysis increases the validity and quality of the NBU’s monetary policy decisions.
- Current Account Balance in 2025: Why NBU is Unafraid of Deficit
The widening of the current account deficit in Ukraine, fueled by a significant increase in imports as the full-scale war grinds on, is unrelated to either a consumer boom or the low competitiveness of domestically produced goods. The increased gap is primarily a reflection of priorities and strategic investments in defense capabilities and reconstruction.
The manageability of the latest increase in the current account deficit is ensured by a fundamental source of financing: funds from international partners. In essence, this funding constitutes an investment in shared European security. Such an interpretation most accurately reflects the nature of international support and is consistent with the growing recognition of Ukraine’s strategic role as a key component of EU defense preparedness.
An external-sustainability assessment approach that factors in assistance from international partners reveals that although there is a formal deficit, Ukraine retains its high financial and external sustainability. The implementation of European integration reforms and effective cooperation with international partners are important prerequisites for securing further funding.