Ukraine War Economy Tracker – Centre for Economic Strategy

This economy tracker during the war is a more concise format of the monthly research on the state of Ukraine’s economy that we have been releasing since the beginning of the full-scale invasion. These studies can be found here. The sections are periodically updated to contain the most relevant information.

Follow this link to find a special issue of Tracker with the economic results of 2024.

After falling by 28.8% in 2022, the economy recovered by 5.3% in 2023. Based on the results of 2024, GDP growth amounted to only 2.9% year-on-year — lower than expected. The economic recovery is gradually slowing down. Each quarter of 2024 showed lower growth compared to 2021 than in 2023, and in the fourth quarter, GDP actually declined by 0.1% compared to the fourth quarter of 2023.

The economic recovery continues to be hampered by the difficult security situation, a shortage of skilled workers, and Russian shelling of energy infrastructure. In addition, in 2023, the GDP recovery was boosted by a low comparison base after the fall of 2022 and a rapid increase in public spending, which in 2024 is more likely to be the norm in wartime.

Ukraine entered a full-scale war with consumer inflation of 10% year-on-year (y-o-y). For example, in February 2022, prices for consumer goods and services were 10% higher than in February 2021. The Russian invasion caused a significant acceleration in inflation, which peaked in October 2022 at 26.6% y-o-y. The reasons for this were the direct consequences of the war: the destruction of production facilities, disruption of supply chains, and higher production costs for businesses. The NBU’s hryvnia printing to cover the budget deficit also put additional pressure on inflation: in 2022, the NBU printed UAH 400 billion ($12.5 billion) to buy government war bonds.

At the end of 2022 and throughout 2023, inflation was brought under control thanks to the stabilisation of the economic situation, the NBU’s competent actions, and the refusal to finance the budget by printing hryvnia. The deceleration in inflation was also driven by the record-high harvest in 2023.

However, in 2024, inflation began to accelerate again: the NBU cited the exhaustion of the impact of last year’s significant harvests, electricity shortages and labour shortages, and the summer drought of 2024 as the main reasons.

In May 2025, inflation accelerated to 15.9% year-on-year (1.3% month-on-month), exceeding the NBU’s forecast. The main drivers were a sharp increase in prices for raw food products due to unfavourable spring weather, active exports, higher production costs, and sustained consumer demand.

The largest monthly price increases were seen for fruit (+17.6%), meat (+5.4%), and fish (+1.4%).

Prices for non-food goods rose moderately (3.8% y-o-y), while service inflation remained high (14.6% y-o-y), with restaurant, personal care, and medical services becoming more expensive. Administered prices rose by 19.8%, while fuel price growth slowed to 1.2%.

The NBU expects that inflation has already peaked and will gradually slow down due to the arrival of the new harvest, a stable energy situation, and the high base effect — meaning last year’s figures were already elevated, which reduces the pace of annual growth.

The NBU uses its main monetary instrument, the key policy rate, to influence inflation. The key policy rate indirectly affects the interest rate at which banks lend to businesses and households and the interest rate at which they attract deposits. When the Ministry of Finance plans to sell military bonds, it looks at the deposit rate – government bonds should be more attractive and profitable.

On 7 March, the NBU further raised the key policy rate to 15.5% to reverse the inflation trend and ensure its slowdown in 2025. However, in May, inflation outpaced the key rate. The next key rate review is scheduled for the end of July — at that time, the NBU may increase, decrease, or leave it unchanged.

The yield on domestic government bonds (OVDPs) still exceeds inflation, allowing investors to protect their money from depreciation and earn a real return. However, actual inflation has nearly caught up with bond yields, which may reduce the attractiveness of OVDPs, despite lower inflation projections.

As of 1 June 2025, Ukraine’s international reserves decreased by 4.6% to $44.5 billion. This was driven by large-scale foreign exchange interventions by the NBU (nearly $3 billion) and debt repayments ($606 million), which were only partially offset by inflows from international partners and foreign currency domestic government bonds ($1.4 billion).

Despite the decline, reserves remain higher than at the beginning of the year and cover 5.4 months of future imports (the generally accepted minimum is 3 months).

Since the beginning of 2025, the US dollar has weakened and stabilised at around 41.5 UAH/$, while the euro has risen from 43.5 to nearly 48 UAH/€. This shift is largely driven by uncertainty surrounding the actions of the US administration.

These trends have reignited discussions about adopting the euro as Ukraine’s primary foreign currency. However, given the current structure of reserves — over 80% of which are denominated in US dollars, which also remain the base currency for NBU interventions — such a transition remains a long-term prospect.

Since the beginning of the full-scale invasion, all of Ukraine’s own state budget revenues have been used to finance defence, accounting for approximately half of the state budget. All civilian expenditures of the state budget are financed by foreign financial assistance – in 2024, the need for such external financing is $38 billion.

Please note: data on foreign financing was last updated on 24 February 2025, marking the third anniversary of Russia’s full-scale invasion.

Ukraine enters 2025 with a more stable fiscal position than in 2024. External financing this year is expected to fully cover the state budget’s anticipated needs.

The lion’s share of revenues will come from ERA financing (funds generated from income on frozen Russian assets). These funds can be used not only for “civilian” but also for military expenditures.

At the end of last year, the United States transferred $20 bn in ERA financing for Ukraine to World Bank accounts. These funds will be allocated to public sector salaries and social support programmes, with Ukraine already receiving the first $1 bn tranche.

The EU has also allocated an initial $3 bn to Ukraine from frozen Russian asset revenues, with subsequent tranches to be disbursed evenly throughout the year.

ERA funds must be used wisely, ensuring a financial buffer is preserved for 2026-2027.

Foreign aid covered 73% of Ukraine’s additional state budget needs over the 12 months of 2024. In 2025, this share initially increased but fell to 69% by the end of the first five months of the year. The core source of foreign financing this year is revenue from frozen Russian assets under the ERA programme.

In May 2025, corporate profit tax (CPT) was the top contributor to state tax revenues, making up 26% of the total. However, its year-on-year growth was relatively low — just +8%.

Personal income tax (PIT) saw the strongest performance. Revenues jumped by 74% compared to May 2024 — the highest monthly growth recorded. The same 74% increase applies to total PIT revenues for January–May 2025 versus the same period last year.

Import VAT grew by 10% compared to May 2024. Domestic VAT dropped by 21% month-on-month (vs April), but still rose 7% year-on-year.

Excise revenues held steady in May compared to April, but were up 41% year-on-year. Over the 12-month period from June 2024 to May 2025, they rose by 80% compared to the previous year.

N.B.: We have changed the methodology for calculating state budget expenditures by separating military assistance from foreign partners into a separate category. ‘In-kind military support’ is the expenditures from material military aid that are accounted for as revenues of budgetary institutions. Such military aid may be reflected in the budget indicators with a delay and/or in an incomplete amount. We have also split the ‘Public order and safety’ category, separating ‘Security’ (Ministry of Internal Affairs and Security Service of Ukraine expenditures) and moving remaining civilian items to the ‘Other expenditures’ category. We have also added a 3-month rolling average for the total expenditures to make it easier to observe the dynamics.

Total state budget expenses amounted to UAH 391 bn in April 2025, which is 2% less than in month before.

April’s debt service expenditures were the highest in the first four months of 2025 — three times higher than in March and were up 66% year-on-year.

As usual, the largest share of the budget was allocated to the war — almost half of all public spending. Compared to the previous month, it decreased by 15% but increased by 31% year-on-year.

Defence aid declined slightly after a significant spike in support at the beginning of the year.

Social benefits accounted for only 9% of total state spending and are 7% lower than in April 2024.

Ukraine’s labour market expiriences all the challenges of a full-scale war. The economic shock of the beginning of the Russian invasion led to a drop in both demand and supply of labour. Businesses stopped hiring and people stopped applying for jobs. Later, demand for labour began to recover slowly. The number of people looking for a new job soared in the summer of 2022 and exceeded the average for 2021. However, the trends diverged from there: the need for labour was recovering along with the economic recovery, while the activity of job seekers was declining, not least due to Ukrainians’ migration abroad and mobilisation into the Defence Forces.

Labour market activity remains lower than before the full-scale war. People are more actively seeking work than in 2024, but the number of new résumés posted fluctuates between 80–90% of the 2021 average. The number of new job vacancies has almost stopped growing and remains at 85–90% of the 2021 level.

The State Statistics Service of Ukraine stopped publishing unemployment data when the full-scale war started. The Info Sapiens research agency makes its own estimates of the unemployment rate. According to them, in June 2025 the unemployment rate in Ukraine decreased to 12% — the new lowest level since the start of the full-scale war. However, a proxy indicator of poverty — the share of respondents forced to save on food — rose to 25.2% in June 2025. While Ukraine has shown a clear downward trend in unemployment in recent years, the poverty level has remained relatively stable.

In June 2025, the Business Activity Expectations Index (BAEI) stood at 50.0 — right at the neutral mark. After rising to 50.8 in May, businesses largely maintained their assessments of the current situation. On a year-on-year basis, however, the index improved significantly (from 43.6 in June 2024), indicating a gradual recovery in business sentiment.

Companies pointed to steady demand, sufficient supply of goods, stable energy conditions, seasonal effects, and international support as positive factors. At the same time, persistent shelling of infrastructure, high operating costs, labour shortages, and inflation and exchange rate concerns continued to weigh on sentiment.

Trade remained the most optimistic sector. Industry and construction also posted positive, though slightly weaker, assessments than in May. Only the services sector fell back into negative territory, mainly due to rising costs. Employment expectations remained pessimistic across all sectors except trade.

Changes in business expectations are an important subjective indicator of economic conditions, signalling either a gradual recovery or deterioration in activity.

In June 2025, the Consumer Confidence Index by Info Sapiens stood at 75.7 points — a decline from 79.3 in May. A value below 100 indicates that negative consumer sentiment prevails among the population. The index consists of two components: the Economic Expectations Index (88.1 in June) and the Current Situation Index (57.2 in June). Ukrainians’ economic expectations remain in negative territory and continue to gradually deteriorate.

At the start of the full-scale war, consumer sentiment spiked despite a deterioration in households’ real economic conditions — Ukrainians were highly optimistic about the future. This “corridor” of optimism gradually narrowed as sentiment slowly returned to pre-war patterns. However, in November 2024, the trend shifted: people’s assessment of their current situation continued to worsen for several months, while expectations for the future improved. This may have been linked to Donald Trump’s victory in the US presidential election and hopes for a quick end to the war. In April 2025, the trend reversed again, with expectations beginning to deteriorate.

Throughout the winter, Russia continued to target Ukraine’s power system, aiming to cause maximum damage and prolonged blackouts. However, Ukrainian energy workers repaired all damages and strengthened the protection of critical infrastructure. As a result, Ukraine entered 2025 with minimal or no power outages for households and industrial consumers. The stable situation even allowed for commercial electricity exports at certain hours, helping to balance the grid and generate additional income for energy companies.

In June, Ukraine continued both exporting and importing electricity. Commercial exports increased, with daily volumes hitting record highs on several days at the end of the month. Despite this growth, Ukraine kept importing electricity to help balance the power system.

In June, Ukraine exported 233.6 GWh of electricity abroad. Exports continued uninterrupted throughout the entire month, with key buyers including Hungary (122.2 GWh), Romania (38.8 GWh), Slovakia (37.3 GWh), Moldova (34.3 GWh), and Poland (0.9 GWh).

Electricity imports slightly increased to 203.7 GWh in June, up from 194.1 GWh in May. The main suppliers were Hungary (87.6 GWh) and Slovakia (48.8 GWh). Other contributors included Poland (30.0 GWh), Romania (25.3 GWh), and Moldova (12.0 GWh). Ukraine pays for this imported electricity — it is not provided as aid.

Net electricity exports were positive for 16 days straight, starting on 15 June. As a result, for the first time in a long while, Ukraine exported more electricity than it imported over the course of a full month.

In May, Ukraine’s exports of grains and oilseeds rose by 13%, reaching 3.2 million tonnes. More than 89% of this volume was shipped through Black Sea ports.

On 6 June, the EU’s additional liberalisation measures expired. While the free trade regime remains, no new concessions were granted. According to Economy Minister Yulia Svyrydenko, this affects $3.5 billion worth of trade and could cut export revenues by up to $800 million. Quotas still apply to 40 agricultural product categories, though 23 of them had exports below quota levels.

Ukraine has started creating a Paying Agency to manage agricultural support in line with EU rules. This institution is key for accessing EU pre-accession funding and preparing for participation in the Common Agricultural Policy.

In May, production of all major steel products declined. Pig iron production fell by 2% to 645 kt, steel production by 8% to 636 kt, and rolled products by 4% to 525 kt.

In 5M2025, steel and rolled products production decreased by 2% to 3.06 mt and 2.51 mt, respectively. At the same time, pig iron production is 6% higher than in 5M2024, at 3.01 mt.

The decline in global steel prices reduced export revenues for Ukrainian steelmakers in January-April. Most commodities showed a negative trend, with the exceptions for long products and pipes, which does not affect the overall picture. Iron ore exports were hit hardest, falling by 10.2% to 11.15 mt and by 20.9% to $893 m.

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Household deposits overall continue their upward trend. Both hryvnia and foreign currency demand deposits remain at around 200% of their nominal 2021 level, indicating strong demand for liquidity. Hryvnia term deposits have also been growing, while foreign currency term deposits show no growth — reflecting cautious attitudes toward long-term savings in foreign currency.

In May 2025, both retail and corporate lending in hryvnia continued to grow, with volumes now well above pre-war levels — driven primarily by retail loans. Foreign currency corporate lending increased only slightly. This points to a steady recovery in hryvnia-denominated lending.

However, it’s important to note that while deposits have already reached 200% of their nominal 2021 level, lending still lags far behind. Ukraine’s banking system remains imbalanced during the war: banks earn mainly from National Bank deposit certificates, not from lending.

According to preliminary data from the NBU, Ukraine’s trade balance in goods and services was negative in May 2025, amounting to $4.1 bn. Imports of goods totalled $7.0 bn, more than twice the value of goods exports ($3.4 bn). Similarly, service imports ($1.8 bn) exceeded service exports ($1.3 bn).