Ukraine’s Economic Growth Cut in Half Due to Russian Energy Infrastructure Attacks

A major international development bank has slashed Ukraine's economic growth projections by half following widespread Russian attacks on the country's power grid this winter. The European Bank for Reconstruction and Development now forecasts just 2.5% growth in 2026, down from a previous estimate of 5%.

An international development bank announced Thursday that Ukraine’s economic expansion will be significantly slower this year following Russia’s systematic targeting of the nation’s power grid throughout the winter months, creating major hurdles for businesses entering the fifth year of conflict.

The European Bank for Reconstruction and Redevelopment dramatically reduced its 2026 economic growth projection for Ukraine to just 2.5%, cutting its September forecast of 5% in half due to the ongoing crisis.

According to the EBRD, the economic consequences from Russia’s coordinated missile and drone strikes against electrical facilities and infrastructure—which have forced citizens to endure freezing temperatures and extended blackouts—will continue affecting the nation’s economic performance through 2027.

EBRD Chief Economist Beata Javorcik explained that the reduced projections are “linked to the destruction of critical infrastructure, particularly energy infrastructure.” She noted, “That’s impacting Ukraine today, but it will also impact Ukrainian performance next year because it will take time to make the repairs.”

“Typically in winter businesses have been coping with shortages of electricity but this year the problem was much bigger,” Javorcik stated. “If you have a power outage, you can’t produce because you have no electricity.”

She praised Ukrainian resilience, saying citizens face “an incredible challenge. They deserve a lot of respect for being able to endure this and not lose hope and continue to support their country in the fight.”

The bank’s previous projections anticipated Ukraine could begin reconstruction-related economic activity in 2026, though it didn’t specify whether this required an end to hostilities. This timeline has now been pushed back to 2027 as peace remains out of reach.

Throughout the conflict, the EBRD has facilitated generator purchases and provided credit guarantees for small and medium enterprises, helping Ukrainian banks extend over $3 billion in business financing during wartime.

The bank’s report identified additional economic pressures including workforce shortages from mass emigration and military conscription, adverse weather conditions that hurt grain shipments, and the loss of certain European Union trade benefits. While the EU initially waived import duties when fighting began in February 2022, restrictions were later placed on politically sensitive products like sugar and vegetable oils during a trade agreement review.

Ukraine’s economy contracted by 29% during the war’s first year and remains approximately 20% smaller than pre-conflict levels. Consumer and business expenditure have declined as millions fled the country and major enterprises operate in Russian-occupied territories. The Ukrainian government depends on international loans and grants to fund pensions and salaries for teachers and healthcare workers, while domestic tax revenue primarily supports military operations.

Founded in 1991 to assist former communist nations’ transition to market economies following the Cold War’s end, the London-based EBRD represents 77 countries, the European Union, and the European Investment Bank. The organization has since extended operations to additional regions. The Ukraine assessment was included in the EBRD’s broader economic forecasts covering Eastern Europe, former Soviet states, Central Asia, the western Balkans, and sub-Saharan Africa.