Ukraine's real GDP contracting for third consecutive month, declines 0.6% in Q1 2026 - institute

MOSCOW. April 22 (Interfax) - The Institute for Economic Research and Policy Consulting (IER) records real GDP in Ukraine contracting for the third month in a row, declining by 0.3% year-on-year in March 2026.

IER updated its economic slowdown estimate for February to 0.5% in the latest Monthly Economy Monitoring of Ukraine report, published on its website, Ukrainian media reported. The institute's previous report estimated Ukraine's real GDP contraction at 1.6%. Thus, real GDP declined by 0.6% year-on-year in Q1 2026.

IER estimates the real gross value added (GVA) decline in the mining industry at around 2% year-on-year in March 2026 due to disruptions to gas and iron ore extraction operations. Electricity generation and gas distribution fell by 15% year-on-year. In March 2026, some generation capacities were repaired, and renewable energy sources also contributed to electricity production. In addition, there was quite a large number of sunny days in March. Electricity imports dropped 25% month-on-month to 942,000 MWh. Electricity exports from Ukraine stood at 30,000 MWh.

Real GVA in manufacturing declined by 0.7% year-on-year in March 2026. Real GVA growth in trade remained at around 2% year-on-year, though IER expects wholesale trade to have declined.

Real GVA in the transport sector went down by approximately 10% year-on-year in March 2026 due to higher fuel costs and small volumes of iron ore and oil shipping.

Inflation in March accelerated to 7.9% versus 7.6% in February and 7.4% in January after seven months of slowdown.

"This reflects the rise in the price of oil and petroleum products due to the war in the Middle East and high electricity prices for businesses. Rather high competition for the limited demand for non-food products has so far restrained price growth," IER said.

As reported, the International Monetary Fund's World Economic Outlook for April expects Ukraine's real GDP to grow by 2% in 2026, accelerating to 3.5% in 2027.

The World Bank also downgraded its outlook of Ukraine's economic growth in 2026 to 1.2% from 2% but said it expected it to accelerate to 4% in 2027.

The National Bank of Ukraine lowered its forecast for Ukraine's real GDP growth in 2026 to 1.8% but expects economic recovery in 2027-2028 to accelerate to 2.8% and 3.7%, respectively.

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