Ukraine’s Central Bank Forecast: Increased Inflation, Decreased GDP

Despite the 2026 inflation forecast increasing by 2% compared to the previous figure, the central bank kept the key rate at 15%, and thinks the effect of the Middle East War on prices is temporary. Make us preferred on Google Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied (Image by Zakhar Dunin / Kyiv Post) Content Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied Flip Make us preferred on Google Ukraine’s central bank, the National Bank of Ukraine (NBU), slashed the real GDP forecast for 2026 and worsened inflation figures, as Russian strikes on energy infrastructure and the war in the Middle East combined to reverse months of hard-won disinflation progress. The worsening of official figures reflects the blow of Russia’s strikes and Middle East War on the war-battered Ukrainian economy, countering prior progress in disinflation – an economics term that here did not mean prices were falling (which would be deflation), but that they were rising at a lower, more sustainable rate. Follow our coverage of the war on the @Kyivpost_official . The NBU said it now expects real GDP growth of 1.3% in 2026 after a weaker-than-expected first quarter, slower business activity, and mounting economic fallout from higher global energy prices, including fuel costs. The NBU now projects real GDP growth to be lower than its January forecast of 1.8% – after economic activity nearly stalled in the first quarter, expanding by only 0.2% year-on-year. The NBU wrote that the cumulative toll of Russian attacks on Ukraine’s energy grid – its system and logistics, a harsh winter, and delays in the inflow of international aid as the primary drags. The Middle East War, the NBU wrote, added further negative economic effects that are still accumulating. Real GDP will recover to 2.8% growth in 2027 and 3.7% in 2028, according to the forecast. Other Topics of Interest EU Plans to Disburse First Part of €90B of Loan With €6B on Ukrainian-Made Drones European Commission President Ursula von der Leyen announced that the first defense package under the €90 billion loan will focus on drones produced within Ukraine. However, inflation is now expected to accelerate to 9.4% in 2026, compared with an earlier estimate of 7.5%, before easing to 6.5% in 2027 and returning to the 5% target in 2028. Previously, headline inflation reached 7.9% year-on-year and core inflation hit 7.1% – both above the NBU’s January projections. “The rise will be driven mainly by higher business costs, especially from energy prices that have already increased. Higher fuel prices will also add to inflation directly and indirectly, pushing up the cost of many goods and services over time,” NBU governor Andriy Pyshny said at the briefing . The April frosts, which again occurred in 2026 as temperatures dropped to zero at night, are also included in the worsened forecast. However, Deputy NBU Governor Volodymyr Lepushynsky said, replying to Kyiv Post question, that the NBU does not “see a significant threat to inflation dynamics from this (the April frosts), as fuel prices put more pressure on inflation. “The National Bank has estimated a larger food supply harvest into its forecast. So far, this forecast is holding true; we expect food prices to continue falling through mid-year, given base effects and rising fuel costs. The trend will reverse, and food inflation will accelerate to 9% by year-end,” Lepushynsky said. The bank’s baseline scenario already prices in a short-lived confrontation and a moderate energy price shock. But if the conflict drags on, global energy prices will climb higher than currently assumed, external demand for Ukrainian goods will weaken, and Russia’s capacity to sustain its full-scale war will increase, compounding Ukraine’s own inflationary and fiscal pressures. But despite higher prices and worse forecasts, the central bank held its key policy rate at 15% on Tuesday, April 30 , warning that price pressures had intensified sharply and that additional rate hikes remain on the table if conditions worsen further. “At the same time, this decision will not pose a threat to the continued growth of lending, which is still expanding at a rapid pace,” Pyshny said at the briefing. Uncertainty over external financing has eased considerably. In April, the EU unblocked €90 billion ($105 billion) for Ukraine under its Ukraine Support Loan program, with the first tranche expected in June. Further disbursements are anticipated under the EU Ukraine Facility, the G7 Extraordinary Revenue Acceleration mechanism, and the IMF Extended Fund Facility through 2029. Total international aid inflows are projected at over $53 billion this year, roughly $42 billion in 2027, and $22 billion in 2028. It should be enough, the NBU wrote, to cover all critical budget expenditures and keep international reserves at $60–67 billion through 2028. Nominal GDP is projected to rise from Hr.8.93 trillion ($203 billion) in 2025 to Hr.12.28 trillion ($279 billion) by 2028, with Hr.10.03 trillion ($228 billion) expected in 2026 and Hr.11.17 trillion ($254 billion) in 2027. The current account deficit is also seen widening, reaching $49.4 billion in 2027, while international reserves are forecast to remain relatively strong at $64.8 billion in 2026 before declining to $61.1 billion in 2028. Olena Hrazhdan is the Business Reporter at Kyiv Post, covering Ukraine’s markets, business, and economic policy. While she reports broadly on economic issues, her core focus is banking, finance, monetary and fiscal policy. Olena previously wrote for leading Ukrainian business media and became a Fellow of the International Monetary Fund’s Journalism Fellowship in 2024.