**Ukraine’s Central Bank Holds Key Rate, Lowers Growth and Inflation Forecasts**
In a move aimed at tackling the country’s economic woes amid ongoing war, Ukraine’s National Bank has kept its benchmark interest rate unchanged at 15.5% while revising down economic projections. The regulator now expects core inflation to decline to 9.7% in 2025 before reaching the 5% target in 2027.
The revised outlook reflects significant wartime losses, rising business costs, deteriorating crop forecasts, and a weakening hryvnia. “The NBU will maintain sufficiently tight monetary conditions for as long as necessary to ensure sustainable disinflation toward the 5% target,” said Andrii Pyshnyi, the National Bank’s chairman.
**Economic Growth Forecast Downgraded**
The central bank has downgraded its economic growth forecast to 2.1% for 2025, down from a previous projection of 3.1%. This reflects intensified attacks and continued destruction of production facilities, infrastructure, and housing, which have fueled migration pressures and constrained economic expansion.
**Foreign Financial Support Crucial**
While foreign financial support has helped sustain growth in the first half of the year, the NBU warned that adequate external financial assistance will be crucial for maintaining macrofinancial stability under all scenarios. Ukraine expects to receive approximately $54 billion in external aid in 2025, having already secured nearly $24 billion.
**Risks Ahead**
However, the remaining $30 billion from G7 nations and the EU may face risks after Ukraine’s recent move to strip the independence from key anti-corruption agencies, drawing criticism from Western partners. European Commission President Ursula von der Leyen expressed “strong concerns” over the legislation, while U.S. Senator Lindsey Graham also criticized Zelensky’s decision to sign the controversial law.
**A Gradual Return to Normal?**
The NBU’s baseline scenario assumes a gradual return to normal economic conditions, with growth of 2-3% expected in 2026-2027. However, the ongoing war and potential shortfalls in international financing remain the primary risks to inflation dynamics and economic development.
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