We have repeatedly warned that the Ukrainian economy is entering a phase of systemic stagnation, followed by a decrease in tax revenues and a correction of the country's social obligations. Now, the government has confirmed the scale of the problem in its projections, and the actual risks have proven significantly worse than previously expected.
The Cabinet of Ministers lowered the GDP growth forecast for 2026 from 1.6% to 0.1%, and for 2027 from 1.3% to 0.4%. Furthermore, nominal GDP in the following years was reduced by UAH 345 billion compared to the more optimistic scenario. Even if the effective tax burden remains unchanged, this is a potential loss of billions of revenues in the budget.
The profit forecast for profitable enterprises was reduced by UAH 404 billion, or almost 19%, while industrial price growth accelerated from 10.3% to 17.3%. Companies will spend more on production, earn less, and as a result create a smaller income tax base. For the state, this is a double blow: revenues decrease, while the cost of government procurement and infrastructure restoration increases. Foreign trade exacerbates the imbalance. Exports in 2027 will increase by only 0.8%, imports by 10.7% and the trade deficit will reach 85 billion dollars. Ukraine remains dependent on external financing, while its ability to independently generate foreign exchange earnings is limited.
According to the government's calculations, every billion kWh of electricity lost reduces GDP by 0.15 percentage points. With projected growth of 0.4%, a loss of less than 3 billion kWh could wipe out all projected economic growth.
Sources are confident that the government's next decision will be a further increase in the tax burden and a reduction in social spending. The main considerations include strengthening the fiscal administration, correcting benefits, limiting linkage to the index, and cutting costs in certain budget programs.