OECD predicts slowdown in Ukraine's GDP growth to 2% in 2025-2026 due to security risks
Ukraine’s economic growth, which slowed to 2.9% last year from 5.3% a year earlier, is set to slow further this year to 2% and remain at that level in 2026, the Organisation for Economic Co-operation and Development (OECD) predicts.
Overall activity in Ukraine continues to recover, but at a slow pace. Growth is forecast to slow to 2% in 2025 and remain at 2% in 2026 unless security is restored, the OECD Economic Outlook, published on Tuesday, says
According to the organization’s experts, growth will be supported by international aid, defense spending and domestic private demand.
At the same time, labor shortages will continue to hold back growth, and uncertainty remains extremely high.
The OECD believes that, given the high needs for defense and reconstruction spending, government revenues can be increased by reforming tax administration to better support tax compliance, reducing benefits, and narrowing the scope of the simplified tax regime. Policies to support veterans and migrants in reintegration into the economy will be central to future economic growth.
According to the document, the budget deficit will be about 20% of GDP in 2025 and 2026. This year it will be financed by external assistance, including the G7 ERA mechanism for frozen Russian assets worth $50 billion and the EU's Ukraine Facility.
OECD experts expect average annual inflation to rise to 13.2% this year from 6.5% last year and to decline to 7.1% next year.
As reported, the International Monetary Fund (IMF) in late February downgraded its 2025 economic growth forecast for Ukraine by 0.5 percentage points to 2-3%, and the World Bank a little later downgraded it from 6.5% to 2%.
In April, the National Bank of Ukraine lowered its growth forecast for Ukraine's economy this year to 3.1% from 3.6% in its previous January macroeconomic forecast, and from 4.0% to 3.7% in the next.
Finally, in May, the EBRD also downgraded its GDP forecast for Ukraine, for the second time this year. It is now 3.5%, and next year – 5%. Similarly, the European Commission downgraded its GDP growth forecast for Ukraine in 2025 to 2.0% from the 2.8% expected in November, and in 2026 – to 4.7% from 5.9%.