Ukraine’s economy is expected to grow slowly in 2026 — at around 1% — while operating under continued wartime conditions, budget constraints, and electricity shortages. At the same time, macrofinancial stability, moderate inflation, and controlled hryvnia depreciation are projected to persist. This was stated by Tomas Fiala, founder of Dragon Capital, during the Global Outlook: Success in Adversity event organized by the European Business Association.
Investment: Returning to Pre-War Volumes
According to Fiala, Dragon Capital plans to exceed its pre-war level of investment in Ukraine in 2026.
“We have increased our investments over the past two years, and last year we almost reached pre-war levels. This year we plan to exceed them.”
The company has already implemented or is in the process of deploying approximately $100 million in new investments.
GDP Forecast and Electricity Deficit
Dragon Capital forecasts Ukraine’s GDP to grow by 1% in 2026, followed by 1.8% in 2027.
“Our projections are based on the assumption that the war will continue, and we also expect an electricity deficit.”
The average annual electricity deficit could increase to 10% in 2026, compared to 4% in 2025. A colder winter — with average temperatures about 8 degrees lower than last year — has increased electricity consumption and put additional pressure on the system.
However, improving weather conditions in spring and continued energy sector investments could help stabilize the situation.
Budget, International Support, and the Hryvnia
Ukraine’s state budget deficit in 2026 is expected to reach approximately $50 billion. Nevertheless, according to Fiala, international assistance — including EU programs, ERA, the Ukraine Facility, and cooperation with the International Monetary Fund — will help maintain macrofinancial stability and potentially allow the National Bank of Ukraine to increase international reserves.
Dragon Capital expects moderate hryvnia depreciation of 3–7%, which is below the projected inflation rate of around 7.5%.
“I Am Partially Disappointed with the IMF”
Fiala also expressed criticism regarding the compromise between the IMF and the Ukrainian government on postponing certain prior actions.
“I am partially disappointed with the International Monetary Fund and their compromise with the government regarding prior actions that we should have already implemented.”
These include:
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introducing VAT on international parcels;
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expanding VAT requirements for certain sole proprietors (FOPs).
“I do not understand why the Ukrainian government should subsidize Chinese manufacturers and exports by not imposing VAT on imported goods.”
Fiala emphasized the importance of equal tax rules:
“Banks should not be paying a 50% corporate profit tax while others do not pay VAT and only pay a 5% single tax. The rules should be the same for everyone.”
Foreign Investment: Security Remains the Key Barrier
Commenting on prospects for attracting foreign capital during wartime, Fiala stressed that security risks remain the main deterrent.
Even large-scale reforms — privatization, liberalization, deregulation — cannot fully offset wartime risks. However, companies already operating in Ukraine are demonstrating readiness to expand their businesses, provided market reforms continue.
“Those already working in Ukraine are willing to consider expanding their businesses. For them, reforms remain the decisive factor.”
