Photo: EPA

The International Monetary Fund forecasts that Ukraine’s gross domestic product (GDP) could grow by 2–3% in 2025, but it warns of "exceptionally high" risks that GDP may instead contract by 1%.

According to a scenario published on the IMF’s website, the downside case assumes active hostilities continue until mid‑2026, versus the baseline forecast of the war ending in late 2025. In this event, Ukraine’s financing needs would increase by US $12.4 billion.

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To maintain debt sustainability and secure additional funding—both external (in the form of highly concessional, nearly grant‑like loans) and domestic—the IMF recommends:

  • Increasing value‑added tax (VAT) and accelerating alignment of excise duties with EU levels, as both measures can be implemented rapidly and effectively to boost revenues.
  • Prioritizing capital and social expenditures, and potentially reinstating certain foreign‑exchange restrictions introduced at the outset of the full‑scale war.

Should shocks exceed even this pessimistic scenario, further steps may be required, including:

  • Additional hikes in military levies and excise taxes
  • Introduction of a luxury-goods tax
  • Expanded domestic bond issuance

Expenditure limits on specific categories may also be necessary, contingent on the inflow of highly concessional or grant‑based external finance. All fiscal measures should be temporary and carefully structured to mitigate macroeconomic and social impacts.

Despite these risks, the IMF considers Ukraine’s support program sustainable, citing the authorities’ strong commitment and international financial guarantees. Over the medium term, key economic indicators are expected to converge toward the baseline forecast, underpinned by the "anchor" of EU accession, continued migration inflows, and private investment.

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