Ukraine’s economic debate is increasingly shifting from short-term wartime survival toward the question of how to sustain development during a prolonged conflict, as economists warn that modest growth forecasts underline the scale of the country’s structural challenges, reported Ukraine Business News.

The IMF forecast in April that Ukraine’s real GDP would grow by just 2% in 2026, reflecting slowing momentum after several years of wartime disruption and dependence on external financing.

Former central bank chairman Bohdan Danylyshyn said the figures showed Ukraine remained trapped in what he described as “low-growth war conditions”, where the economy is no longer collapsing but is still far from entering a phase of rapid recovery.

“For a country that has lost part of its industrial base, suffered demographic decline and widespread infrastructure destruction, 2% growth means survival rather than development,” Danylyshyn argued in recent commentary on Ukraine’s economic outlook.

Ukraine’s economy shrank sharply following the start of the war in 2022, with industrial facilities, energy infrastructure and logistics networks repeatedly targeted by missile and drone strikes. While international financial assistance has helped stabilise public finances and the banking system, economists increasingly warn that the country risks stagnation unless wartime spending is transformed into a broader industrial strategy.

The IMF has argued that defence expenditure can stimulate economic activity if a significant share of spending remains inside Ukraine through domestic production, employment, research institutions and local supply chains.

Analysts say this could accelerate the development of sectors such as defence manufacturing, engineering, electronics, materials science and energy technology, while also reducing Ukraine’s dependence on imports.

Danylyshyn said Ukraine’s defence policy should become the foundation of a new industrial model centred on technology, innovative manufacturing and applied science. Public spending, he added, should increasingly be evaluated according to its internal multiplier effect, particularly in sectors including defence, energy, transport, housing and infrastructure.

Foreign aid also needs to be tied more closely to domestic economic capacity-building, economists say. If external financing stimulates local production, localisation, lending, exports and employment, it can function not only as emergency assistance but as a long-term development mechanism.

At the same time, investor sentiment towards Ukraine has improved in recent weeks, helping drive a rally in Ukrainian Eurobonds.

According to analysts at Ukrainian investment group ICU, international investors were encouraged by a series of Western media reports suggesting Russia’s military campaign may be losing momentum.

The Financial Times reported earlier this month that Chinese leader Xi Jinping had privately indicated Russian President Vladimir Putin may regret launching the invasion, although Beijing later denied the report.

German newspaper Bild subsequently highlighted what it described as mounting Russian battlefield difficulties, including heavy losses, stalled territorial gains and Ukrainian strikes deep behind Russian lines. Bloomberg later reported that Ukraine and its allies were increasingly confident Russia’s offensive operations were slowing.

Against that backdrop, Ukrainian Eurobonds rose by around 3% last week alone and have gained nearly 25% since late March, when global market volatility triggered a sharp sell-off.

Eurobonds maturing in 2029 climbed to around 84 cents on the dollar, their highest level since Ukraine’s 2024 debt restructuring. Series C bonds due in 2032 rose to approximately 82 cents, while longer-dated securities linked to future GDP performance also advanced, though they remained below earlier highs.