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The war-torn Ukrainian economy could expand by 5% next year if a ceasefire is agreed, the European Bank for Reconstruction and Development (EBRD) has predicted – but prospects for reconstruction depend on a lasting peace.
The London-based lender has invested $6.2bn (£4.9bn) in projects in Ukraine over the course of the three-year conflict.
It forecasts GDP growth for Ukraine at 3.5% this year, as the country battles inflation caused by Russian attacks on power generation, and 5% in 2026, if hostilities are halted.
Beata Javorcik, the EBRD’s chief economist, said it is prepared to support the rebuilding of Ukraine in the event that negotiations secure an end to the war. “We stand ready to invest when the time comes,” she said.
As Washington hails an anticipated agreement with Kyiv on extracting Ukraine’s valuable mineral resources, Javorcik praised the Zelenskyy government’s approach to steering the economy through terrible circumstances.
“The positive things are that despite three years of the war, the Ukrainian government managed to maintain macroeconomic stability,” she said. “That’s a great achievement.”
But asked about the longer-term outlook for Ukraine, Javorcik pointed to EBRD analysis of two centuries’ worth of data, which showed that of those countries in which a war is fought, half still bear the economic scars 25 years later.
“The success of reconstruction is not assured,” Javorcik said. “To a large extent this is driven by the fact that peace is elusive, that conflict gets reignited relatively quickly.”
She added: “What this resolution to the conflict will mean for Ukraine will depend on how stable the situation is.”
Donald Trump has begun talks with Moscow aimed at ending the war but the US has not invited Kyiv to join the negotiations, and appears to be contemplating making significant concessions to Russia.
Trump initially mooted the mineral extraction arrangement as a way of Kyiv repaying US backing for the country’s war efforts. It remains unclear what role the US expects to play in reconstructing Ukraine, if peace talks succeed.
The chancellor, Rachel Reeves, said: “Russia’s illegal invasion of Ukraine has placed a heavy burden on the global economy, with higher energy prices, higher food prices and disruption to global trade.”
Speaking at the G20 meeting of finance ministers in South Africa, Reeves added: “It is essential it’s a just and a durable peace if we are to get the benefits both for Ukraine and indeed the global economy.”
Javorcik was speaking as the EBRD, which is backed by 75 countries as well as the EU, issued its latest economic forecasts for the region it covers – which includes central and eastern Europe, the Baltic states and the Caucasus.
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Across these countries, the EBRD has revised down its forecast of average GDP growth for 2025 to 3.2%, from the 3.5% it had forecast in September.
Javorcik pointed to the impact of continued economic uncertainty, such as Trump’s tariff plans, and the backdrop of rising defence spending across the continent, as nations adjust to a more dangerous geopolitical environment.
“Defence expenditure is going up not just in the Baltic states and Poland; it has gone up in Lebanon, in Armenia, in Kyrgyz Republic, in Greece, in Tunisia,” she said.
“It’s a broad-based disappearance of the peace dividend that we enjoyed over the last decade – and this has implications for long-term growth.
“If defence expenditure is viewed as a necessity, and if you can’t cut social expenditure because it’s politically impossible, then what you’re going to cut is education, R&D, investment in infrastructure – meaning all the things that build foundations for long-term growth,” she said.
Analysing the potential impact of Trump’s tariffs, taking a 10% across-the-board levy as an example, the EBRD said most countries in its area of operation would not be hit hard directly because their exports to the US are limited.
But the indirect impact could be much larger: its analysis suggests for every 1% hit to German GDP growth because of tariffs, EBRD economies would contract by 0.8%. “That’s an average figure. It would be somewhat higher for countries like Turkey, Hungary and Slovakia,” Javorcik said.
