National Bank of Ukraine cuts GDP growth forecast for Q2 to 1.7% from 2.4%

MOSCOW. May 12 (Interfax) - Ukraine's real GDP, which contracted 0.5% YoY in Q1 2026, is expected to grow by 1.7% in Q2, by 1.9% in Q3, and by 1.7% in Q4, Ukrainian media reported, citing the quarterly Inflation Report for April 2026, published on the National Bank of Ukraine (NBU) website.

"Robust consumer demand and investments in the defense sector will support GDP growth in 2026, but it will be lower than last year because of extensive energy shortages, higher operational costs of businesses and a smaller budget deficit," the NBU said. The regulator worsened its economic growth forecast for 2026 to 1.3% from 1.8% in the January Inflation Report.

The NBU's Inflation Report, published in January 2026, projected GDP growth at 2.4% in Q1, at 2.5% in Q2, at 1.6% in Q3, and at 1.0% in Q4.

The serious difference between the Q1 figures is due to the actual "considerable losses of generation and grid capacities, which led to large power shortages and the necessary tough measures to balance the system amid abnormally cold weather," the NBU said. An additional factor was the government's reserved budgetary policy because of external assistance delays, it said.

The challenging situation in the energy sector resulted in net exports' larger negative contribution to the GDP changes, as the decline in the physical volume of exports of goods and services in Q1 remained at the previous quarter's level of around 1% YoY, while imports in physical terms increased up to 12% YoY.

This dynamics was caused by the substantial volume of natural gas customs clearance, active imports of energy equipment and larger purchases of petroleum products. These factors were only partially offset by a drop in car imports after taxes on car imports were reinstated in Ukraine.

Meanwhile, the NBU has kept its general forecast for GDP growth in 2027 unchanged at 2.8% but has seriously revised its quarterly estimates, changing them to 4.7% from 1.6% in Q1, to 2.5% from 2.2% in Q2, to 2% from 3.1% in Q3, and to 2.5% from 3.9% in Q4.

"The growth of Ukraine's real GDP is expected to speed up starting from 2027, facilitated by revived investment activity, the recovery of the energy system and larger harvests," it said.

In the updated Inflation Report, the NBU raised its forecast for the country's nominal GDP from UAH 9.89 trillion to UAH 10.03 trillion in 2026, and from UAH 10.995 trillion to UAH 11.170 trillion for 2027.

"Revision of actual data, a higher GDP deflator, but slower real GDP growth in 2026," the NBU said.

As reported, State Statistics Service data show that GDP growth in Ukraine slowed to 1.8% in 2025 from 2.9% in 2024 and 5.5% in 2023, after plunging 28.8% in 2022.