Exclusive The NBU has «plan B» in case of a lack of financial support from international partners

In 2026, the National Bank expects Ukraine's GDP to grow by 2% y/y, with average annual inflation at 6.6% y/y

According to all forecasts, next year will be worse than this year. The NBU expects Ukraine’s economy to grow by only 2% in 2026. The main risks remain the continuation of the war, shelling of energy infrastructure, and staff shortages, compounded by a likely lack of financial support from international partners. However, the National Bank of Ukraine (NBU) has contingency plans in place for this scenario.

GMK Center presents the main points of the speech by NBU Deputy Governor Volodymyr Lepushynskyi at the online event “What will Ukraine’s economy look like in 2026? An overview of forecasts,” held by the Center for Economic Strategy in collaboration with the German Economic Team.

Economic forecasts

It is gratifying to see that the median value of GDP growth forecasts for 2026 from non-governmental analysts (2.4%) is very close to our forecasts. We expect modest economic growth in Ukraine – around 2% for next year.

It is also positive that the median expectation of a decline in average annual inflation from non-governmental analysts for next year (7%) is close to our forecast. Let me remind you that our inflation forecast for next year is 6.6%.

For us, inflation is not just a figure that we simply observe, but a monetary policy target. We target only one indicator: inflation, not, for example, the national currency exchange rate. Is it appropriate to do so in wartime? Yes. Whatever happens in the economy, the country, or geopolitics, we see a certain anchor of stability based on the example of recent years.

Our strategy is to bring inflation down to 5% over the next three years. This is important as an anchor for economic development. All our monetary instruments are geared towards achieving this goal: the discount rate, exchange rate policy, and currency restrictions policy. Everything is aimed at achieving the inflation target on the one hand, and on the other hand, preventing the economy from adapting excessively to the shocks of war.

Budget financing and international support

In the baseline scenario for financing and budget deficit projections, the median expectation of external financing needs for 2026 from non-governmental analysts ($45.4 billion) is also close to our projections. According to our estimates, approximately $45 billion is needed to support the budget next year.

The situation is currently under control, and Ukraine has a certain margin of safety, particularly in terms of international reserves. Our baseline scenario assumes that international partners will continue to support Ukraine. We are counting on support not only from Europe but also from other allies.

As for a scenario in which financial support from international partners is insufficient, we do, of course, have “plan Bs.” We have a whole range of them, and we have unique experience in applying them, but this is not the baseline scenario. The situation may develop in different ways, and the response will depend on the specific circumstances.

Exchange rate policy during the war

Does the NBU consider its exchange rate policy to be adequate for wartime? There are certain specifics to our policy. There is indeed an imbalance in Ukraine, primarily an objective fiscal imbalance, with a budget deficit of 25% of GDP this year. It is characteristic that it is financed to a large extent by partners, i.e., in foreign currency.

The currency enters Ukraine and goes directly to the NBU’s international reserves. The National Bank exchanges this currency for hryvnia for the government. The hryvnia enters the market, but the currency does not. Accordingly, the NBU must direct it to the market to cover the structural currency surplus in the public sector and the structural currency deficit in the private sector.

To balance them, the National Bank covers the structural currency deficit, while leaving some room for the market to determine the exchange rate. When the structural deficit narrows, the exchange rate appreciates; when it widens, it depreciates.

Therefore, on the one hand, the exchange rate is flexible, and on the other hand, we understand our role and the need to redirect currency to the market, since the hryvnia enters the currency market from the budget, and currency can only come from our international reserves.

Is this an imbalance? It is rather a balancing of two major imbalances: fiscal imbalance on the one hand and currency deficit in the private sector on the other. They are directly related to each other. Accordingly, under these conditions, it is impossible to completely offset objective import needs with the exchange rate.

Of course, there is some room for the exchange rate to respond to what is happening in the economy, and it does so. However, it is objectively impossible and unnecessary for the private sector to cover the need for imports of weapons and energy equipment, which are mainly responsible for the expansion of imports.

As long as currency is coming in and international reserves are growing, it is inappropriate to say that we are accumulating some kind of imbalance.