Thieves Cry: There is not enough money for Ukraine

 

“Even though the West has agreed on security guarantees for Ukraine, a ceasefire with Russia is still a long way off. Ukraine's economy will depend on financial aid for years to come.

 

Because despite all the damage and destruction, Ukraine could have crossed an important milestone in 2025: an economic output of 200 billion US dollars. This target figure has not yet been reached due to crises – be it the global financial crisis of 2008. But even if it looks like a recovery on paper, the Ukrainian economy is still in a fragile state. It cannot afford to make any mistakes, because resilience is not guaranteed in the long term. In a recent discussion organized by the Centre for Economic Strategy (CES), a Kyiv-based think tank, nine leading macroeconomists gathered to share their forecasts for the Ukrainian economy in the coming year. The general consensus was that the initial emergency mode is over, and Ukraine is now in a difficult phase. The situation is characterized by sluggish growth and high uncertainty.

Global coverage of Ukraine is dominated by diplomatic negotiations between US President Donald Trump and Russian leader Vladimir Putin, who are seeking ways to force Ukraine to concede. All analysts assume in their baseline scenario that the conflict will continue into 2026. One of the economists considers an alternative scenario that takes into account a ceasefire at the beginning of this year.

The most striking feature of the 2026 forecasts is the enormous uncertainty. The median forecast projects moderate real GDP growth of 2.4 percent in the coming year – only slightly higher than expected for 2025.

However, this variable depends heavily on the assumed developments on the front lines. Dragon Capital, one of Ukraine's largest financial and investment companies, provides the most sobering figures, illustrating the extent of the lost economic growth. In the event of continued conflict, they expect growth of one percent, and if a stable ceasefire is achieved in the first half of 2026, they forecast growth of 5 percent. The difference represents the peace dividend.

 

The true cost of defense

 

Russia's military spending is roughly equivalent to Ukraine's entire gross domestic product (GDP). Ukraine cannot withstand this alone. Foreign aid partially compensates for the lack of financial resources.

 

Ukrainian economists estimate that in 2026, their country will need approximately $45 billion in external financing and around $39 billion in international financial assistance to balance the budget and cover debt servicing. It is important to note that these figures are largely derived from the government's budget plan, which is based on current needs and expectations regarding future financial support from international partners (currently primarily Europe). However, the actual needs depend on the strategic objectives of the conflict.

According to estimates by the Centre for Economic Strategy, Ukraine's 2026 budget will be underfunded by at least 13 percent in terms of miltary expenditures. This will most likely necessitate a budget revision and a search for additional resources by mid-year.

The EU's commitment to providing Ukraine with a €90 billion loan while granting aid is a positive signal for macro-financial stability for the next two years, the lack of consensus on the use of Russian assets has revealed a strategic vulnerability and a collective action problem: when individual efforts are costly and the benefits (common security) are shared, it leads to an unequal distribution of burdens. Ultimately, waging a defensive conflict is far more costly than merely financing it.

 

Thanks to the reform of the central bank and a comprehensive restructuring of the banking sector in the ten years preceding 2022, Ukraine was able to cushion the inflationary shock and stabilize price increases. An inflation rate of approximately 9 percent is expected by the end of 2025. Given the tight monetary policy, private financial analysts expect inflation to fall in 2026 and reach 6.6 percent by the end of the year. These forecasts are consistent with those of the central bank, which expects the inflation target to be met in 2027.

 

The analyses confirm that Ukraine has mastered the art of tactical economic survival and has managed to stabilize itself. But "treading water" is not a strategy for long-term success in Europe.

 

Yeleazar Levchenko is an economist at the Centre for Economic Strategy in Kyiv (CES).”