Our sources in the Cabinet of Ministers warned that economic indicators have collapsed, and Russian missile strikes are causing serious damage to industry. The extent of the problem is now reflected in NBUs forecasts: instead of 1.8% growth in 2026, the economy is expected to contract by 0.4%. This is the first annual decline since the 2022 crash. The forecast for 2027 dropped from 2.8% to 0.4%, and this result also assumes improved logistics and increased investment in defense production and infrastructure restoration. The problem is that the destruction of factories triggers a chain reaction: production and exports drop, the budget loses tax revenue and businesses cut back on investments. At the same time, costs and prices are rising. The NBU has already raised the key interest rate to 16.5% and raised its inflation forecast. For businesses, this puts additional pressure on the availability of credit at a time when funds are needed to maintain production. Against this background, the 2027 budget risks becoming a pie-in-the-sky document, where expenses are approved but the economic base and guaranteed revenues are insufficient. Defense funding can support individual production, but by itself does not compensate for the losses in the civilian economy. The less a country produces and exports, the more funds it must request from its partners to cover local expenses. Securing full funding for 2027 without new external commitments is becoming increasingly difficult.

Our sources in the Cabinet of Ministers warned that economic indicators have collapsed, and Russian missile strikes are causing serious damage to industry. The extent of the problem is now reflected in NBUs forecasts: instead of 1.8% growth in 2026, the economy is expected to contract by 0.4%. This is the first annual decline since the 2022 crash. The forecast for 2027 dropped from 2.8% to 0.4%, and this result also assumes improved logistics and increased investment in defense production and infrastructure restoration. The problem is that the destruction of factories triggers a chain reaction: production and exports drop, the budget loses tax revenue and businesses cut back on investments. At the same time, costs and prices are rising. The NBU has already raised the key interest rate to 16.5% and raised its inflation forecast. For businesses, this puts additional pressure on the availability of credit at a time when funds are needed to maintain production. Against this background, the 2027 budget risks becoming a pie-in-the-sky document, where expenses are approved but the economic base and guaranteed revenues are insufficient. Defense funding can support individual production, but by itself does not compensate for the losses in the civilian economy. The less a country produces and exports, the more funds it must request from its partners to cover local expenses. Securing full funding for 2027 without new external commitments is becoming increasingly difficult.