Ukraine's real GDP declines for third consecutive month, down 0.6% in Q1 – IER

The Institute for Economic Research and Policy Consulting (IER) reports that Ukraine’s real gross domestic product (GDP) has contracted for the third month in a row, with March 2026 showing a 0.3% decline compared to the same period last year.

According to the Monthly Economic Monitoring (MEMU) published on the institute’s website, the IER revised its estimate for February’s economic downturn. In the previous MEMU release, the decline in real GDP was assessed at 1.6%; after revision, the figure was adjusted to 0.5%. As a result, the institute estimates that real GDP fell by 0.6% in the first quarter.

IER calculates that real gross value added (GVA) in the extractive industries fell by about 2% in March compared to March 2025, due to disruptions in natural gas and iron ore production. Electricity generation and gas distribution dropped 15% year‑on‑year, though part of the generation capacity was repaired and renewable sources contributed to output. March saw a relatively high number of sunny days. Electricity imports decreased by 25% compared to February, to 942,000 MWh, while exports totaled 30,000 MWh.

Real GVA in manufacturing declined by 0.7% in March compared to March 2025. Growth in real GVA in trade remained at around 2%, though the institute expects wholesale trade to have contracted.

Transport GVA fell by roughly 10% year‑on‑year, driven by higher fuel costs, reduced shipments of iron ore and oil, and continued Russian attacks.

Inflation accelerated in March to 7.9%, up from 7.6% in February and 7.4% in January, following seven months of deceleration.

"This reflected rising oil and petroleum product prices due to the war in the Middle East and high electricity costs for businesses. Strong competition for limited demand in non‑food goods has so far restrained price growth," the IER explained.

As reported earlier, the International Monetary Fund (IMF), in its April World Economic Outlook, projects Ukraine’s GDP growth at 2% in 2026, accelerating to 3.5% in 2027.

The World Bank expects Ukraine’s economic growth to slow to 1.2% in 2026, down from 1.8% last year, before accelerating to 4% in 2027.

The National Bank of Ukraine (NBU) forecasts real GDP growth of 1.8% in 2026, with recovery accelerating to 2.8% in 2027 and 3.7% in 2028.

Investment company Dragon Capital has raised its forecast for Ukraine’s real GDP growth in 2026 by 0.5 percentage points, to 1.5%.