While peace talks yield no results, the IMF has outlined a negative scenario: war until mid-2026

At the same time, experts from the International Monetary Fund also consider probable the scenario of the war ending by the end of 2025. But the updated document states that the post-war environment remains extremely uncertain.

UNN reports with reference to imf.org.

Details

In accordance with the Fund’s policy on lending in conditions of extremely high uncertainty, Fund staff updated the negative scenario, still basing it on the assumption of a more intense war lasting until mid-2026.

It is also noted that in the third quarter of 2025, there is a probability of a “shock”, however, first of all, the scenario “assumes a longer and more intense war compared to the current baseline scenario”.

ReferenceAccording to the baseline scenario, which the IMF also currently takes into account, Russia’s war against Ukraine should end in the last quarter of 2025 – this is the baseline scenario, but its relevance is not yet definitively denied.

Regarding the war that could end by mid-2026 and the forecast of a “shock”.

The shock will have a significant impact on business and household sentiment and the rate of migrant return, and will also cause further large-scale damage to energy infrastructure and power outages compared to the baseline scenario.

Overall, the 170-page document reiterates in one form or another the thesis that “risks and uncertainties remain extremely high.”

The assumptions about the war underlying the program scenarios remain relevant, as peace talks have not yet yielded tangible results, creating both positive and negative risks regarding the duration and intensity of the war.

It is stated that the current program “has limited capacity to absorb any new shocks.” Including from a longer and more intense war. But the IMF program “gives Ukraine enough time to implement the reforms needed to restore external viability in the medium term.”

2025 growth forecast remains at 2-3%

The GDP growth forecast for 2025 remains at 2-3% y/y, as a smaller-than-expected electricity deficit is largely offset by higher gas import needs due to reduced domestic production capacity and lower agricultural exports.

Inflation remains high, but moderate, expectations generally stable. War-related pressure requires additional budget for 2025. Defense spending needs for 2025 have increased, necessitating an additional budget.

Hundreds of billions for defense: government submitted amendments to Budget-2025 to Verkhovna Rada30.06.25, 15:00 • 913 views

The medium-term fiscal path has been revised with a more balanced fiscal adjustment and a changed expenditure structure.

At the same time, risks remain extremely high, mainly due to the war.

It also mentions “the authorities’ determination in policy formulation (although it has recently somewhat decreased due to a weakening reform impulse in parliament) and emergency planning” – states the document.

The international community’s commitment to continue supporting Ukraine is maintained.

The IMF predicts that “high defense needs and weaker economic activity will lead to a further increase in the budget deficit in 2025–2026,” – despite the anticipated implementation of some corrective measures.

The analytical document also states that the “post-war environment remains extremely uncertain.”

RecallThe International Monetary Fund revised the EFF program for Ukraine, postponing and adding new structural benchmarks, while Ukraine is asking to change the structure of payments in 2025. All quantitative performance criteria as of the end of March have been met, and the total size of the IMF program remains $15.5 billion.

IMF approves 8th EFF program review, Ukraine to soon receive $500 million – Shmyhal30.06.25, 22:06 • 19707 views