Inflation will pick up in the coming months, but will begin to decline in the summer, according to the NBU’s updated forecast. By the end of 2025, inflation will decelerate to 8.7%. In 2026, it will return to the NBU’s target of 5%. Real GDP growth will accelerate slightly from the previous year, to 3.1% in 2025. In the coming years, the economy will grow by 3.7%–3.9% a year.
The baseline scenario of the NBU’s forecast is based on the assumptions that sufficient volumes of international financing would be maintained and that the economy’s functioning conditions would gradually normalize, which would, among other things, facilitate the return of part of forced migrants and promote growth in investment in the years that follow. A detailed analysis and a forecast of the macroeconomic situation can be found in the April 2025 Inflation Report.
Inflation is gradually running out of momentum and will begin to decline in summer
Over the months ahead, inflation will increase moderately in annual terms due to last year’s low comparison base. At the same time, inflation has all but run out of momentum, as evidenced by slower quarterly increases in the core CPI and prices for raw food products.
This summer, price increases for a wide range of goods and services are expected to begin to slow in annual terms. Thanks to the NBU’s monetary policy measures, the arrival of new and higher harvests into the markets, the improvement of the energy situation, as well as subdued price pressures from Ukraine’s main trading partners (MTPs), inflation will decelerate to 8.7% in 2025, and to its 5% target in 2026. Going forward, inflation will remain close to the target level.
The NBU will maintain its key policy rate at 15.5% and will move on to a policy easing only after the price surge has peaked and the risk of inflation becoming stuck in double-digit territory has waned
A hike in the key policy rate and changes to the operational design parameters of interest rate policy contributed to the growth in interest rates on term hryvnia instruments and to the greater protection of hryvnia savings from losing value to inflation. As a result, demand for hryvnia instruments grew, restraining FX demand from households. A prudent monetary policy will help consolidate these positive trends. The NBU anticipates that the measures it has taken, coupled with efforts to maintain the sustainability of the FX market, should prove sufficient to break the inflationary uptrend in the coming months and gradually reduce inflation to its 5% target within the policy horizon.
The weakening of price pressures will allow the NBU to return to its easing cycle of interest rate policy. According to the current macroeconomic forecast, the key policy rate will decrease to 14% in Q4 2025 (on average for the quarter). Meanwhile, considering the high level of uncertainty, which over past months has only risen, the NBU will respond flexibly to changes in the balance of risks to price developments and inflation expectations. If the risk of inflation settling in the double digits rises, the NBU will keep the key policy rate at its current level for longer than the updated macroeconomic forecast projects, and will be ready to take additional steps.
In 2025–2027, the economy will grow by 3%–4% a year, with large-scale investment programs and a brisk return of migrants potentially speeding the recovery up
Expected crop yield increases, reduced power shortages, large defense orders, investment in reconstruction, and robust consumption will support the economic recovery. However, GDP growth will be limited (3.1% in 2025 compared to 2.9% last year) by labor shortages, damage to gas infrastructure, and a cooling of external demand amid global trade tensions.
In 2026–2027, the economy will gain 3.7%–3.9% annually, boosted by ramped-up investment in reconstruction, the resumption of production, the rebuilding of infrastructure, and robust consumer demand. As security risks abate and economic conditions go back to business as usual, private investment will continue to grow and make up for the gradual rollback of economic incentives from the state.
Ukraine’s GDP is currently close to its potential level. The prospects for faster economic growth will primarily depend on increases in production factors, in particular the scale of capital investment and productivity, as well as on further developments in labor migration.
Economic recovery amid labor market mismatches will drive the growth in employment and wages
The problem of labor shortages – though somewhat less acute now that businesses have made efforts to attract people previously underrepresented in the labor market (students, the elderly, veterans, persons with disabilities) – remains relevant. Mismatches between the demand for and supply of skilled labor in the context of economic recovery will lead to further growth in real wages (by 3%–4% per year in 2025–2027).
Rising demand for workers as the economy revives will contribute to a gradual drop-off in the unemployment rate (to 10% in 2027). However, this process will be restrained by still-significant mismatches in the labor market, including war-induced changes in the structure of the economy, as well as uneven economic recovery across regions and sectors.
International aid and domestic borrowing will support the non-monetary financing of the budget deficit
This year, Ukraine will receive larger disbursements of financing from international partners than previously anticipated (USD 55 billion). These inflows should be sufficient to both cover this year’s budget deficit and build up a public-finance buffer for the next year, when the volume of foreign aid is likely to start declining. On top of that, the consolidated budget deficit excluding grants in revenues will gradually narrow within the forecast horizon (to 7% of GDP in 2027, down from 19% in 2025) thanks to the strengthening of the domestic funding base as the economy recovers.
On top of updated macroeconomic forecasts, the April Inflation Report features a number of special topics:
- Accuracy of Macroeconomic Forecasts
- U.S. Tariff Policy: Carpe Diem (Seize the Day)
- Sea Corridor’s Impact on Foreign Trade: Higher, Faster, Better
- Tariff Warfare Fallout for Ukraine’s Economy and Monetary Policy
- Could Seizure of Frozen russian Assets Affect Euro's Global Perception?
- Updated Quarterly Projection Model to Guide Monetary Policy Decisions.