Since March 2022, the Centre for Economic Strategy (CES) has been preparing monthly reviews of Ukraine’s economy during a full-scale war. The special topic of the February review is: «How does attacks on the energy system affect business activity?».
All previous reviews can be found under the link.
In January and February, the situation in the energy sector deteriorated due to intense Russian attacks and harsh weather conditions, which affected all sectors of the economy. Despite this, inflation continues to slow down, although the NBU’s monetary policy has become more conservative. Imports play a key role in adaptation: in 2025, electric batteries worth $1.5 billion were imported. The restoration of energy supplies has contributed to an increase in non-defense budget expenditures, but military spending still prevails. Although Ukrainian enterprises are demonstrating resilience, they still need support.
Key changes in the Ukrainian economy in February:
- Sectoral analysis: The energy situation deteriorated significantly in January and February due to intense Russian shelling and adverse weather conditions. This led to a decline in business and consumer sentiment, and the destruction of railways and ports negatively affected business activity.
- Monetary sector: In January 2026, inflation continued to fall, reaching 7.5% y-o-y due to persistent effects of high 2025 harvests and easing of labour market conditions. NBU expects inflation to continue to decrease in the coming months but revert to 7.5% by the year-end. With that, the central bank lowered the key policy rate from 15.5% to 15.0% in January, forecasting only one more 50bp (0.5 pp) rate cut in March. The market has inverted the yield curve on domestic gov bonds suggesting a belief in lower inflation despite short-term inflationary risks of energy deficit.
- International sector: With incoming donor support and increased war-related and reconstruction needs, Ukrainian trade deficit continues to grow. In Q4 2025, imports grew 29% y-o-y with primary contributing sectors being machinery, equipment, and transport (49% of growth in imports), mineral products (13%), and unclassified/informal sector (29%). In 2025, spending on imports of battery storage reached $1.5 bn, which is 2.5 times the amount spent on direct electricity imports.
- Fiscal sector: Harsh winter conditions and seasonality reduced budget revenues in January by 18% m-o-m. December spending surged, driven mainly by war-related outlays and defence aid. In 2025, almost all growth in state budget expenditure came from war needs, while civilian spending remained broadly stable.
- Special topic: Most enterprises have been affected by energy outages, and a significant number have already invested in autonomous energy supplies. However, the energy crisis has forced enterprises to reduce production volumes due to declining demand and rising production costs. There is a high risk of business closures and rising unemployment, which may be partially mitigated by government support.
See our report below for further details.
Panelists:
- Svitlana KobelevaCo-owner of Teahouse;
- By KrykavskyiDirector of Government Relations, ArcelorMittal Kryvyi Rih;
- Borys ShestopalovCo-owner and CEO of HD-group;
- Andrii TeliupaAdviser to the Minister of Economy of Ukraine;
- Artem VdovychenkoDeputy Head of the Economic Analysis Division, Monetary Policy and Economic Analysis Department, National Bank of Ukraine (NBU);
- Valentyna VedrovskaHead of GR at the Ukrainian Council of Defence Industry.
Moderator: Hlib VyshinskyExecutive Director, Centre for Economic Strategy.
This event has been funded by UK International Development from the UK government; however, the views expressed do not necessarily reflect the UK government’s official policies.
