Ukraine’s economy experienced a temporary bump in August 2025, with real GDP growth accelerating to an estimated 8% year-over-year after a slight decline in July, according to the latest Monthly Economic Monitoring report from the Institute for Economic Research and Policy Consulting.
Agricultural Sector Drives Volatility in Economic Growth
According to the IER estimate, real GDP grew by 8% yoy in August after a 0.5% yoy decline in July, driven by a later harvest. Agricultural gross value added (GVA) is estimated to rise by 37% yoy due to a surge in wheat and barley harvest. IER estimates that real GVA in manufacturing increased by 6% yoy on steady demand, a rebound in food processing, and defense procurement; however, extractive GVA fell by 7% yoy amid coal-mine losses, partly offset by construction materials. Electricity generation rose about 10% yoy from last year’s low base. Transport fell nearly 10% yoy after the end of gas transit, a temporary oil-transit pause, and weaker rail volumes.
Energy Sector Prepares for Winter Despite Attacks
Ukraine’s energy sector continues to face significant challenges from ongoing Russian attacks, yet shows signs of adaptation and recovery. The country achieved a record monthly electricity export of 450,000 MWh in August, representing a 60% increase from July and the highest figure since integration into the European energy system ENTSO-E.
Hungary and Moldova were the primary destinations for Ukrainian electricity exports, accounting for 38% and 29% of exports, respectively. Meanwhile, the country has been steadily building its natural gas reserves, with 11.2 billion cubic meters stored by September 1 – exceeding last year’s levels by mid-September.
However, the energy infrastructure remains under constant threat. Russian attacks in late August and early September targeted facilities across six regions, including thermal power plants and gas transportation infrastructure, temporarily implementing rolling blackouts in some areas.
Transportation Infrastructure Modernization
A significant milestone was reached in September with the opening of the first European standard railway track between Chop and Uzhhorod stations – a 22-kilometer section representing the largest European gauge railway project in independent Ukraine’s history. The UAH 1.3 bn project, funded equally by EU grants and European Investment Bank loans, now enables direct passenger rail connections to Bratislava, Vienna, and Budapest.
Rail freight transport showed a strong recovery, with Ukrzaliznytsia transporting 2.8 mn tons of grain cargo in August – a 2.3-fold increase from July and 6% higher than August 2024.
Trade Dynamics Reflect Economic Pressures
External trade patterns in August revealed the ongoing challenges facing Ukraine’s economy. Exports fell to approximately USD 3.1 bn, down 10% year-over-year, with agricultural exports particularly affected by lower crop stocks. Metallurgical product exports hit their lowest levels in five months, declining 18% year-over-year to USD 380 m.
Imports totaled USD 6.7 bn, showing a 16% increase compared to the previous year, driven primarily by machinery and equipment purchases, which rose 25% year-over-year to USD 2.7 bn. This suggests continued investment in productive capacity despite wartime conditions as well as high needs for energy and defense equipment.
Inflation Moderates for Third Consecutive Month
Consumer inflation continued its downward trajectory, slowing to 13.2% year-over-year in August from a peak of 15.9% in May. This marks the third consecutive month of declining inflation, primarily driven by lower vegetable prices due to a good harvest and stable electricity tariffs maintained since June 2024.
The National Bank of Ukraine maintained its key policy rate at 15.5% per annum in September but signaled the possibility of rate cuts later this year if inflationary pressures continue to moderate.
International Support Remains Critical
Ukraine’s economic stability continues to depend heavily on international assistance. In August, the country received EUR 3.1 bn from the EU under the Ukraine Facility program, though this was below the planned EUR 4.5 bn due to unmet performance indicators. Additional support came through a EUR 1.0 bn tranche under the European Recovery Assistance program.
The financing gap for 2026 remains significant, with confirmed external financing estimated to be about EUR 17 bn below government needs envisaged in a timely submitted Draft State Budget Law for 2026. However, the European Commission’s proposed reparation loan initiative could help bridge this gap.
Looking Forward
Despite the ongoing challenges posed by the war, Ukraine’s economy continues to show remarkable adaptability and resilience. The strong agricultural performance, gradual energy sector stabilization, and sustained international support provide a foundation for continued growth, which, though is low. However, success will depend on maintaining security for critical infrastructure, continued international financial support, and the effective implementation of economic reforms.
The coming winter months will be a crucial test of Ukraine’s energy preparedness and overall economic resilience, with the government and international partners working to ensure adequate resources and infrastructure protection to maintain economic stability through the challenging period ahead. Military assistance remains essential for protecting sky as well as for the fight on the frontline.
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