Dragon Capital improves Ukraine's 2026 GDP forecast to 1.5%, downgrades hryvnia exchange rate forecast to UAH 45.5/$1

MOSCOW. March 27 (Interfax) - Ukraine's investment company Dragon Capital has improved its forecast for Ukraine's real GDP growth in 2026 by 0.5 percentage points to 1.5%, while at the same time downgrading its hryvnia exchange rate forecast for the end of the year to UAH 45.5/$1 from UAH 44.0/$1, Ukrainian media reported citing the company's analysts.

Olena Belan, director of Dragon Capital's analytical department and chief economist, said the company's baseline macroeconomic scenario proceeded from the assumption that the crisis would continue into 2026-2027, suppressing economic growth.

According to the company's updated forecast, Ukraine's real GDP will grow 1.5% YoY in 2026, compared to 1.0% in the previous forecast, in part due to increased defense industry funding. In 2027, the economy will grow by only 0.5%, the forecasts shows.

In an alternative scenario assuming that a sustainable ceasefire might be agreed by mid-2026, Dragon Capital expects Ukraine's GDP to grow 3.5% in 2026 and 5.0% in 2027.

The company has also worsened its inflation forecast for the end of 2026 to 7.1% from 6.3%, while expecting it to slow to 5.2% by the end of 2027.

Dragon Capital expects the national currency, the hryvnia, to devalue to UAH 45.5/$1 in 2026 and to UAH 48.0/$1 in 2027. The company also predicts that the National Bank of Ukraine (NBU) will gradually widen the range of daily exchange rate fluctuations.

"A prolonged war in the Middle East would negatively affect Ukraine's economy due to increased inflationary pressure and growing imports, although the overall impact will be limited," Belan said.

Dragon Capital analysts anticipate Ukraine's foreign trade deficit to increase to $57 billion in 2026 and decrease to $52 billion in 2027, while the NBU's international reserves are projected to grow to $61 billion by the end of 2026 and to $70 billion by the end of 2027.

The budget deficit will remain close to $50 billion in 2026-2027, during which time Ukraine will be able to receive around $95 billion in external budget financing, Dragon Capital said. The company expects the share of loans in budget support to decrease to some 25% in this period from 55% in 2022-2025. At the same time, if oil prices remain as high as $100 per barrel for a long time, inflation this year could rise to 9%, and the NBU will unlikely reduce the key rate or might even switch to raising it, the analysis shows.

As reported, the NBU expected Ukraine's real GDP to grow 1.8% in 2026, 2.8% in 2027, and 3.7% in 2028.