National Bank downgrades forecast for Ukraine's GDP growth in Q2 2026 to 1.7% from 2.4%

Ukraine's real gross domestic product (GDP), which declined by 0.5% in the first quarter of 2026 compared with the same period of the previous year, will grow by 1.7% in the second quarter, 1.9% in the third quarter, and 1.7% in the fourth quarter, according to the updated quarterly forecast published by the National Bank of Ukraine (NBU) in its April Inflation Report on the regulator's website.

"Steady consumer demand and investment in the defense sector will support GDP growth in 2026, but it will be lower than last year due to high electricity deficits, rising business production costs, and a smaller budget deficit," the NBU noted, having downgraded its overall economic growth forecast for this year to 1.3% from 1.8% in the January Inflation Report.

At that time, the central bank expected GDP growth of 2.4% in the first quarter of this year, 2.5% in the second quarter, 1.6% in the third quarter, and 1.0% in the fourth quarter.

The NBU explained the significant discrepancy between its first-quarter forecast and actual data by citing "substantial losses of generation and grid capacity as a result of Russian attacks, which, combined with abnormally cold weather, led to a high electricity deficit and necessitated stringent balancing measures for the system." Additional impact also came from restrained fiscal policy amid delays in the receipt of external assistance, the central bank said.

According to the Inflation Report, the difficult situation in the energy sector led to a growing negative contribution of net exports to GDP change: the decline in physical export volumes of goods and services in the first quarter remained at around 1% year-on-year, while growth in physical import volumes accelerated to 12% year-on-year. This dynamic was driven by significant customs clearance volumes of natural gas, active imports of energy equipment, and increased purchases of petroleum products. These factors were only partially offset by a decline in passenger car imports following the restoration of their taxation.

As for next year, the NBU maintained its overall GDP growth forecast at 2.8%, but significantly revised its quarterly expectations: growth in the first quarter of 2027 was revised to 4.7% from 1.6%, in the second quarter to 2.5% from 2.2%, while in the third quarter it was downgraded to 2.0% from 3.1%, and in the fourth quarter to 2.5% from 3.9%.

"From 2027 onward, economic growth is expected to accelerate due to a revival in private investment, stabilization of the energy sector, and increasing harvests," the National Bank noted.

The forecast for nominal GDP in the updated Inflation Report was raised for this year from UAH 9.89 trillion to UAH 10.03 trillion, and for next year from UAH 10.995 trillion to UAH 11.170 trillion.

"This reflects revised actual data, a higher GDP deflator, but slower real GDP growth in 2026," the NBU explained.

This NBU Inflation Report contains a separate section titled "Accuracy of Macroeconomic Forecasts," in which the central bank states that during 2019-2025 its forecasts were among the most accurate among all institutions evaluated.

"At the same time, the dynamic and unpredictable development of events caused by the course of the full-scale war forced the NBU and other market participants to regularly revise their assessments. The main factors behind these adjustments were changes in assumptions regarding the volume of international assistance, as well as prolonged and multidirectional supply shocks," the document states.

The report cites 2025 as an example, when the NBU's generally more conservative forecast for real GDP dynamics still turned out to be overly optimistic because economic growth slowed significantly due to intensified Russian attacks, which led to the destruction of production facilities, logistics infrastructure, and a high electricity deficit.

"Analysis of the errors shows that there is no systematic bias in the NBU's forecasts: deviations from actual data do not demonstrate a consistent tendency toward overestimation or underestimation of indicators. To a large extent, these discrepancies are caused by unpredictable external factors, primarily changing food supply conditions and revisions to assumptions regarding the duration and intensity of security risks," the National Bank said.

The NBU added that its forecasts, like those of other leading central banks, are usually more conservative than market forecasts, which is explained by the asymmetry of the cost of errors: for the NBU, the consequences of underestimating risks are significantly more dangerous than the consequences of excessive caution.

"Despite this approach, the accuracy of the NBU's forecasts generally remains higher than the average among other organizations," the central bank believes.

As reported, according to the State Statistics Service, Ukraine's GDP growth slowed to 1.8% in 2025 from 2.9% in 2024 and 5.5% in 2023, following a 28.8% decline in 2022, the first year of Russia's full-scale aggression.