Since March 2022, the Centre for Economic Strategy (CES) has been preparing monthly reviews of Ukraine’s economy during a full-scale war. The January special focuses on the major changes in Ukraine’s economy over the course of 2025.
All previous reviews can be found under the link.
Executive summary:
- Sectoral analysis: Real GDP growth slowed in 2025 to ~2% due to the deteriorating security situation, new infrastructure and production capacity losses, and a significant electricity shortage at the end of the year. Other factors included the adverse impact of weather conditions on harvest pace, the restoration of EU quotas on Ukrainian agricultural exports, labour shortages amid further migration, and high production costs. Nevertheless, fiscal stimulus remained a key driver of economic growth, supporting investment demand, while consumer demand remained high due to continued wage growth. Nevertheless, due to limited domestic production capacity and significant defence needs, high domestic demand was mainly met by imports.
- Monetary sector: Inflation concluded 2025 at 8.0% y-o-y, significantly outperforming both NBU (9.3%) and private forecasts (8.8%). While the year was marked by volatility, shifting from negative supply shocks in the first half to strong disinflation from oversupply in the second. Food prices remain elevated at 10.2%, keeping inflation expectations high. Meanwhile, NBU foreign reserves reached an all-time high of $57.3 billion, providing a sufficient buffer for nearly 6 months of imports.
- International sector: The trade deficit continued its deepening trend in 2025 as imports reached $84.8 billion (more than 2x exports) driven by the critical need for energy and defense-related goods. While overall refugee outflows slowed by 34% in 2025 compared to 2024, a significant shift occurred following the liberalization of cross-border movement for men aged 18-22. Roughly one out of every seven young men in this cohort exited the country since August.
- Fiscal sector: Total state budget revenues in 2025 increased nominally by 21%, but it is still insufficient to cover budgetary needs. In January, revenues fell by 11% and the plan for the period was not met due to overly high expectations in the latest budget amendments. Annual growth is driven by income taxation due to military tax. In November, non-military expenditures increased, while defence spending declined. Total financial support to Ukraine in 2025 amounted $52.4 bn, which is the highest level since 2022.
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