Key Points and Summary – After more than three years of war, Ukraine’s economy “teeters on the edge” as its initial recovery slows to a crawl.
-GDP growth is hampered by the ongoing fighting, a shortage of skilled workers, and persistent Russian attacks on energy infrastructure.
-A more serious crisis now looms on the horizon: a massive funding gap. International aid programs, which cover all of Ukraine’s non-military spending, were structured with the expectation that the war would end in 2025.
-With hostilities continuing, Ukraine may only have half of the nearly $75 billion it needs for 2026-2027.
Ukraine On the Brink?
After more than three years of war, the state of Russia’s economy and what it means for the outcome of the war has often been discussed.
But what about Ukraine’s economy? Can it hold up enough to keep the Ukrainian war effort viable?
Tracking the Economy
The Centre for Economic Strategy maintains a Ukraine War Economy Tracker, which keeps track of how well Ukraine’s economy is performing.
“After falling by 28.8% in 2022, the economy recovered by 5.3% in 2023,” CES says.
“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.”
“Teeters on the Edge”
Back in June, The Washington Post reported that Ukraine’s economy was “on the edge,” as it looked at that point like there was little hope of a ceasefire arriving anytime soon.
The idea of such a ceasefire, in fact, had been “at the heart of all economic forecasts,” a Ukrainian senior administration official told the newspaper.
“That hope for a quick ending when Trump came on the scene had been shared by many Ukrainians, but the reality has sunk in that despite some U.S. efforts, the war could drag on for years and take Ukraine’s sputtering economy down with it,” the Post report said.
Ukraine, the Post said, does not only receive military aid from its allies.
“Ukraine’s Western allies currently cover the country’s nonmilitary expenditures — such as pensions, health care and education — by garnishing interest payments from Russian assets abroad that have been frozen,” the newspaper reported, adding that Ukrainian President Volodymyr Zelenskyy had asked the G7 to continue providing up to $40 billion in annual budgetary support, to “ensure our resilience and the ability of our country to carry on.”
A Funding Gap?
Meanwhile, Kyiv Post reported this week that Ukraine is concerned that international aid will only cover half of the $74.8 billion “needed” for 2026 and 2027.
“All donor financing programs created for Ukraine expected hostilities to end in 2025, yet Russia has accelerating attacks on Ukraine by air, sea and land, leaving Ukraine with a worst-case-scenario budget deficit uncovered,” the report said.
“Ukraine will need $74.8 billion to cover 2026-2027 if Russia’s full-scale war continues in 2026, the finance ministry explained to Kyiv Post.
But the final figure for 2026 alone is expected to be even larger – Ukraine needs ‘almost $45 billion,’ adding to the need to service public debt, the press service added in reply.”
“I believe that together with our key stakeholders, we will arrive at an acceptable way to meet these needs,” Ukraine’s minister of finance, Sergiy Marchenko, said earlier this year.
“Collapsing Under the Weight of the War”
Meanwhile, the Ukrainian website Freedom reported this week that the Ukrainian Foreign Intelligence Service is also sounding the alarm about Ukraine’s economy.
“Imbalance in the Russian economy: civilian business loses out to the military machine” is the title of a Telegram post, translated into English, from FIS.
“A key factor has been the sharp decline in the purchasing power of the population due to high interest rates. The civilian sector is in stagnation: companies are sending employees on unpaid leave en masse or switching them to a part-time work week, which has led to a rapid increase in hidden unemployment. One industry after another is turning to the authorities for support — from coal and railways to the automotive industry.”
About the Author: Stephen Silver
Stephen Silver is an award-winning journalist, essayist, and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review, and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, national security, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.
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