Status and prospects for Ukraine’s economy – the spring of 2025

This report provides a basic introduction to and assessment of how Ukraine’s economy has been affected by being at war. To understand its development, we will examine trends dating back to 2010 – that is, before the annexation of the Crimean Peninsula and the war in Eastern Ukraine – and the outlook for the Ukrainian economy through to 2030.

Between 2010 and Russia’s full-scale invasion in 2022, Ukraine’s economy was characterized by transition and several economic shocks. In the early part of the decade, the economy was on a path to recovery in the aftermath of the global financial and credit crisis. However, Ukraine still faced major challenges in its transition to a market economy, including weak institutions and widespread corruption. The economy was later hit by three major setbacks: first in 2014/2015 with the annexation of Crimea and the war in Donbas (-15 percent), then during the COVID-19 pandemic (-4 percent), and finally the sharp decline following Russia’s full-scale invasion (-29 percent).

Throughout this period, the government implemented several reforms, particularly in monetary policy, to adapt and strengthen the economy. However, Ukraine continues to struggle with a large informal economy even after the full-scale invasion, partly because many workers avoid official registration out of fear of being mobilized for the war.

The state budget has increased significantly to finance the defence effort against Russia – its share of GDP rose from 30 to 60 percent between 2021 and 2024. Adjusted for inflation, the defence budget grew twelvefold during the same period. In 2024, defence and security expenditures accounted for over 60 percent of consolidated public spending. This sharp increase has been made possible due to financial support from other countries, a substantial rise in national debt, money printing, and tax increases. In addition, Ukraine has received large quantities of military equipment from abroad, which economically has been equivalent to the country’s annual defence budgets.

Even after the war eventually ends, Ukraine will remain dependent on international economic support for a long time due to the high costs associated with reconstruction and economic transformation.

The economic outlook is particularly influenced by the course of the war, emigration and labour force availability, energy supply, and the ability to maintain exports – especially of agricultural products. Nevertheless, there is significant potential for growth beyond current forecasts, especially depending on three key factors: the return of Ukrainian refugees after the war, a reduction in the informal economy, and more efficient energy use in industry and households.