ICU predicts Ukrainian economy will contract due to destruction of industry and logistics
Investment group ICU has downgraded its forecast for the Ukrainian economy, expecting GDP to contract by 0.5–0.7% in 2026 and by 1–2% in 2027. Previously, analysts had forecast economic growth of 0.8% this year. The main reasons for the revision are Russian strikes on industrial facilities, warehouses, and transport infrastructure, as well as the effective halt of exports through Black Sea ports.
This is stated in ICU's macroeconomic report dated October 14. Analysts note that Ukrainian business finds itself in the most difficult conditions since 2022, and some economic losses cannot be compensated until the war ends.
Massive attacks are forcing thousands of companies to rebuild production and logistics chains. Some enterprises have lost production capacity and do not plan to resume operations until hostilities cease. Others are temporarily halting production due to security risks and limited export opportunities.
Metallurgical enterprises and iron ore producers are facing the greatest difficulties. According to ICU, industrial production in August fell by 6.1% compared to last year. Negative dynamics are also observed in construction and transport sectors.
The blocking of Black Sea export routes has particularly serious consequences. In the third quarter, Ukraine practically stopped maritime shipments of grain, steel, and iron ore due to Russian attacks on port infrastructure and vessels.
Some cargo was redirected by rail and through Danube ports, but alternative routes do not compensate for the lost volumes. In August, Ukraine's merchandise exports fell by 19% year-on-year. According to analysts' estimates, September figures could have been even worse.
ICU warns that problems may deepen next year. Metallurgical enterprises are likely to be idle longer, and farmers may reduce grain sowing due to difficulties in selling the harvest and low purchase prices.
The destruction of warehouses and transport infrastructure is also accelerating inflation. Higher transportation costs, disruptions in raw material supply, and high fuel prices are increasing production costs.
In September, annual inflation in Ukraine accelerated to 10% from 8.1% in August. ICU raised its consumer price growth forecast for the end of 2026 to 12%. Analysts expect inflation to return to single digits only in the third quarter of 2027.
Against this backdrop, experts forecast that the National Bank may raise the key policy rate by another 0.5 percentage points to 16.5% already in October.
The deterioration in foreign trade indicators is also putting additional pressure on the hryvnia. According to ICU's forecast, the dollar exchange rate at the end of 2026 may reach 45.8 UAH, and at the end of 2027 exceed 49 UAH.
At the same time, analysts do not expect uncontrolled devaluation. In their view, international financial assistance will allow the National Bank to maintain sufficient foreign exchange reserves and control the situation on the currency market.
ICU's forecast differs significantly from the October estimates of the International Monetary Fund, which expects Ukraine's GDP to grow by 1% in 2026 and 3.5% in 2027. ICU analysts suggest that a recession next year can be avoided only if the security situation improves significantly.
Based on: ICU - macroeconomic report of October 14