Ukraine: Scenarios for the Future

Should You Return to Ukraine? The Real Economic Forecast No One Talks About

Author: Erik Naiman, Ukrainian investment visionary and financial analyst

HUGS.FUND YouTube channel

A Tightrope Economy: War, Demographics and Taxes

The first half of 2026 is almost over. Ukraine’s Ministry of Finance has published a new budget resolution — a plan for 2027–2029. So there is something to discuss: the main pillars on which Ukraine’s economy now stands, what it depends on, and what all of this means for investments, savings, and for many people the very personal question: should they return to Ukraine, or is it still too early?

The year 2027 is no longer being planned only by the Ministry of Finance. Businesses, families and ordinary people should also start looking at 2027 already. In other words, this is exactly the moment to make hay while the sun shines and understand the eight pillars on which Ukraine’s economy currently rests.

To begin, imagine a country where bank cards continue to work smoothly even during war; where the national currency has not fallen into the abyss; where public-sector employees are still paid their salaries, pensioners receive their pensions, and banks continue to operate. The IMF’s statement puts it more precisely: “Macroeconomic stability has been broadly maintained,” despite Russia’s war and related shocks.

Now, in summer, there is electricity. But only half a year ago, in winter, Kyiv was sitting without power for nine hours a day. Elevators were not running. Children were doing homework by power banks and batteries. Cafes were not calculating revenue, but how much diesel they had spent simply to exist. Many small restaurants closed, especially those dependent on freezers, such as fish restaurants. Factories were not working in shifts, but in windows — whenever power was available. Energy workers are already warning that the coming winter may be even more difficult.

This is what Ukraine’s economy looks like: stability on the outside, but a fragile stability, and in some ways a seasonal one. It looks like a tightrope walker above an abyss. The main question is not whether the economy will collapse tomorrow. The main question is who is holding the rope, and who is paying for all of this.

Facts, Without Emotion

In 2024, Ukraine’s economy grew by 3.2% in real terms. After the first year of the war, that seemed almost like a miracle. But that was 2024. In 2025, growth slowed to 2%. A few days ago, the IMF lowered its forecast for Ukraine’s GDP growth in 2026 to 1.6%. The Fund’s wording was direct: the consequences of war plus strikes on the energy sector. We can also add strikes on logistics.

It is easy to get caught by the word “stable.” But in this case, stability is not a healthy condition. Growth of 1–2% for a country that needs to rebuild so much is not an economic miracle. It is the steady breathing of a patient on life support.

The economy is holding. I enjoy going to Kyiv restaurants: some have closed, but new ones are opening. Some businesses are in trouble; others are doing well. Overall, the economy has not collapsed. But it is not holding by itself. It is holding on external support. The military part of the economy is growing. And it is important to understand: if a country’s GDP grows by 1–2%, and that growth comes mainly from the military part of the economy, then the civilian economy is in decline. That is the characteristic difference from normal peacetime.

The World Bank, the European Commission and the UN have jointly estimated that Ukraine needs about USD 588 billion over 10 years for recovery. That is almost three annual GDPs. This number will matter later, because where this money comes from, and where it goes, will largely determine whether people should return to Ukraine or not.

In my view, Ukraine as a country is one of the best countries on the planet. But the northern neighbor is not going anywhere. The European Union is not going anywhere. And the Ukrainian system, it seems, is not going anywhere either.

So who is supporting our tightrope walker? Who is paying so the rope does not break? The outside world pays. Taxpayers pay. Business pays — through generators, higher electricity tariffs and higher taxes. Families pay — through emigration and health, because for many people, surviving the fifth year of war has become too much for their health. Our psycho-emotional state depends on whether we slept at night, how we eat, whether we know where our income will come from, where we will live, and whether another Shahed drone or missile will arrive during the night. Future generations also pay — through debt. Debts are rising.

So let us look at the eight macroeconomic forces that support and shape Ukraine’s economy.

1. War as Gravity

War is a force of gravity. It bends everything around it. It is not, in fact, the single most important factor — we will come to that later.

On 10 June, the Verkhovna Rada (Parliament of Ukraine) adopted budget amendments: spending on defense and security was raised to UAH 4.4 trillion. That is almost USD 100 billion. One detail explains almost everything else: Ukraine’s spending on security and defense is higher than all state budget revenues. If we collect all taxes, duties and customs revenues, it is still not enough to pay for war and security. The state collects roughly USD 71 billion and spends almost USD 100 billion.

The first answer to the question “who pays?” is the European Union’s EUR 90 billion loan secured by frozen Russian assets. Today, this is a key source for the military budget and the war economy. Put simply, Ukraine is now fighting largely with money that Europe expects to deduct later from Russian reparations.

But Europe is also acting in its own interest. This is not simply “its own money”; it is a calculation that Russia’s money will be used. The question is whether Russia will agree, and how negotiations will proceed. What matters to us is not the abstract mechanism, but the simple question: who will pay Ukraine?

Right now, for example, in discussions around Iran, there is talk that someone may pay USD 300 billion to rebuild the Iranian economy. Excuse me, but there was hardly a war there: two or three months of strikes — and already USD 300 billion has appeared on the table. Ukraine is in its fifth year of war, and the figure is only USD 588 billion. Is that really the right number? And who will pay it? Who pays for Iran matters less to us. What matters is who will pay for Ukraine.

What if a ceasefire happens tomorrow? For people, of course, that would be a relief. The nights spent in metro stations, or in bed waiting to see whether this missile will hit or fly somewhere else, would end. But for the budget, the end of the war means restructuring. For many factories, it may mean a change of customer. For those who left, it raises the question many are already asking themselves: should they return, or is it too late — or still too early?

For investors in the war economy and MilTech, the question is different: are state procurement guarantees for military products real? Will they be paid after the war ends, or will they remain on paper? For many MilTech companies, this is an existential question. While the war continues, you are alive. When the war ends — what then? That is what stops many from investing: they do not understand what happens after a peace deal or ceasefire is signed.

A ceasefire is not a button that makes everything good. For ordinary people, yes, it may be good. But for many parts of the economy, things may get worse. In reality, it is a switch: a new economy begins. Before 2022, before the full-scale invasion, Ukraine had a more or less peacetime economy, although there was already a military levy and the war in the east continued. Now we have a war economy. After a ceasefire or peace, there will be a third economy. Once an economy has been militarized, it does not automatically roll back. This process must be managed, otherwise economic turbulence begins.

In 2026, there were already short ceasefires — around Easter and 9–11 May. But those were humanitarian pauses, not peace. Fighting continues, and we live in a condition of “war plus active negotiations.” That adds uncertainty. If we were told that the war would definitely last another 20 years, it would be clear that life and business must be rebuilt around war for the next two decades. But when the message is “maybe peace, maybe war,” planning becomes much harder. This uncertainty weighs on economic plans even more than the war itself.

There is one industry that the head of state has called the largest in the country in terms of war money. That same industry is also the most fragile. Why the largest and the most fragile refer to the same thing will become clear toward the end. We are, of course, talking about MilTech.

What does this mean for us? If we or our business are tied to defense procurement or military demand, we depend not on the market, but on whether the war continues. Unfortunately, for people who make money from war, the end of the war will be bad news.

2. The Demographic Funnel

Demographics, in my view, is today the greatest threat after the system itself. I would put the problems of Ukraine’s system first, demographics second, and war third.

Before the war, about 41 million people lived in Ukraine. Yet national censuses were repeatedly postponed, even though Ukraine was obliged to conduct a census at least once every 10 years. The last population census in Ukraine was held on 5 December 2001 — almost 25 years ago. How could a country be managed without knowing how many people live in it? This question should be addressed to all Ukrainian governments starting roughly from 2011. The next census should have been held in 2011, and then again in 2021. This is not the problem of one president, but of several.

Today, estimates vary. The IMF speaks of 33 million people in government-controlled territory. Other researchers say 28–30 million. Some estimates go as low as about 25 million, based on consumption — for example, how much people eat. A difference of millions of people is already a diagnosis of the system. The country does not really know how many people live in it. Perhaps the authorities do not want to know: how many inflated entries, how many voters, how many pensioners. The census was not avoided for no reason. The reason was not money. It was the system.

How many people in the country can work? How many can pay taxes? How many can consume? What is the social and demographic structure? How much housing should be built? What economic and tax incentives are needed? How many people can be mobilized? No one knows precisely. That is chaos.

For any state, people are the most valuable asset. One may make exceptions for Saudi Arabia or Russia, but for most countries this is true. Imagine a chief executive running a business without knowing how many assets he has and what is happening to them. That is how we lived.

Migration adds to this. Abroad, there are 5.5–6 million Ukrainian refugees, mostly women and children. There are also about 3.7 million internally displaced people. Almost 10 million people were forced by the war to change their permanent place of residence. Every fourth person, perhaps every third. Imagine the equivalent in the United States: about 100 million people moving somewhere else.

Add combat losses and civilian losses. And then the third flow, the most painful one: birth rates. In 2025, around 485,000 people died in Ukraine — and these are civilian deaths, not military deaths. Today, for every birth there are roughly three deaths. Fertility is about 0.7 children per woman, one of the lowest levels ever recorded anywhere in the world. This is not a slowdown and not stability. It is a growing demographic crisis funnel.

Yes, 25 million people is still not a small number. It is still one of the larger states in Europe. But there were 51 million in 1991, about 41 million before the full-scale war, and now about 30 million or less. What comes next — 20 million? Ten?

Demographics produces the next number: the ratio of working taxpayers to pensioners in Ukraine is approaching one to one. One worker for one pensioner. No pension system in the world can withstand that. The simple, harsh conclusion is that Ukraine’s state pension system is structurally undermined.

Why are pensions in Ukraine so low? Not because people avoid taxes. They are low because Ukraine has too few working people. This situation will not improve: the number of workers is shrinking, while more people must be supported. There is the army, there are officials, children and pensioners. In effect, one working person today supports not only himself, but also dependents and those who defend, teach and heal.

This demographic situation automatically pushes the authorities toward higher taxes. This is not a theory; it is a concrete hole in the budget. Ukraine has around 10 million pensioners. Payments to them amount to roughly UAH 800 billion per year. The average pension is around UAH 6,500 per month, about USD 140. The Pension Fund does not have enough of its own contributions. The deficit is covered by the budget, meaning taxpayers, at roughly UAH 350 billion per year. That is almost 15% of all state spending.

A separate painful issue is fairness within the pension system. More than half of pensioners receive less than UAH 5,000 per month. That is a little over USD 100 and less than EUR 100 in a country where prices are moving quickly toward European levels. Living on EUR 100 per month is roughly EUR 3 per day. Today, the extreme-poverty line is about USD 2 a day. Ukrainian pensioners are either helped by their children, try to survive somehow, or simply do not make it.

When the state cannot take care of pensioners, someone else takes this responsibility. This is also a hidden tax: the state shifts its duties and problems onto citizens.

There is also a privileged layer of pensioners: around 600,000 people receive special pensions — judges, prosecutors, security officials, and bureaucrats. Their payouts are several times higher. The state introduced a ceiling of 10 subsistence minimums, but ordinary pensioners are still left with the feeling of injustice. Some survive on UAH 5,000 a month; others receive many times more from the same deficit-ridden fund.

Young people look at this, especially those who have left, and think: “Am I supposed to work here so that later I receive nothing from the pension fund?” Young people are leaving. The idea is to replace hands and brains with migrants from poorer Asian countries, but in my view this exchange is clearly unequal, primarily because of the difference in cultural code.

Demographics is not a separate line in the list of problems. It is a multiplier that intensifies all other problems. I have already mentioned the tax problem, but it is also macroeconomic: who will buy the real estate you are building? Who will go to kindergarten? Who will then go to school and university? Higher education in Ukraine is degrading and shrinking, partly because there are no foreign students and fewer domestic students who used to form the base.

Every family that leaves is a minus in the tax base. The future ratio of workers to pensioners and dependents becomes worse. The trend moves in one direction. Whatever the authorities do, birth-rate incentives will no longer stop the process. At best, the situation can be stabilized in about 20 years.

Ukraine used to have a surplus of labor. People went abroad to work because there was not enough work at home. Now it is the opposite: Ukraine has an acute shortage of workers. Seventy-four percent of companies report labor shortages. Almost everyone is forced to raise wages.

In addition to the war, Ukraine has caught a disease of the global economy — the K-shaped model. One line goes up, the other goes down. In the United States, artificial intelligence is rising. In Ukraine, military technologies and MilTech are rising, though with important caveats. Everything where labor makes up a large share of costs is being pulled down, because with labor shortages and expensive labor, such businesses find it increasingly hard to survive. Add mobilization of men of conscription age.

Demographics is quietly rewriting who wins and who loses in the country. With a one-to-one ratio, the state pension is little more than hope — unless you enter some form of public service where high pensions are guaranteed today. But today’s guarantees are not future guarantees. That is why personal retirement capital is no longer a luxury. It is a necessity.

3. The Tax Scissors

The next block is the tax scissors. One reason is demographics: fewer people, more people to support. How does the state make ends meet? Through scissors — two movements at once, both hitting us.

The first blade is the increase in tax rates. Since December 2024, the military levy for civilians has been raised from 1.5% to 5%. Add that to the basic personal income tax rate of 18%, and the effective tax rate is already 23%. This is a direct extraction from wages and personal taxable income.

The second movement is that taxes have arrived seriously and for the long term. In April 2026, the Verkhovna Rada extended the military levy for another three years after the end of martial law. Initially, this tax was introduced as temporary. Now it has been built into the system at least until the middle of the next decade, so the budget can receive another UAH 140 billion per year. For the budget, that is plus UAH 140 billion; for our pockets, it is minus UAH 140 billion.

The temporary levy has become a bridge into the postwar economy. The example of Cyprus shows this: there, too, a temporary levy was introduced and remains to this day. There has been no war there for decades, yet people continue to pay the military levy. Nothing is more permanent than temporary measures. I would not be surprised if this military levy remains with us for a decade.

At the same time, the tax base is expanding. According to the latest budget proposals from the Ministry of Finance, the state is not touching the headline rates: personal income tax at 18%, corporate profit tax at 18%, VAT at 20%, military levy at 5%. But the burden is rising not directly, but point by point.

Income through digital platforms: you work on Uber — you pay; on Bolt — you pay; you sell something through OLX — you pay. There are plans to tax this at a “preferential” rate of 10% instead of the regular 23%. Under EU rules, the exemption for international parcels under EUR 150 is being cancelled. Mandatory VAT is being prepared for simplified taxpayers with turnover above UAH 4 million. Excise duties on tobacco and fuel are gradually being aligned with EU levels. European integration comes through the price of cigarettes and a liter of gasoline: full integration is still far away, but the taxes are already here.

The state is looking into every crack where money previously passed by the treasury. The logic is clear: revenue must be found somewhere. But there is a trap. Tightening the screws further risks not collecting more money, but driving the economy into the shadows. Those who already operate in the formal economy pay. Those in the grey zone hide deeper.

This is not simply tax growth. It is fiscalization on a shrinking base: the state presses harder on a smaller surface. Somewhere, someone may tear.

Banks show how this pressure works. The profit tax was raised to 50%. The National Bank itself warns that this harms the investment attractiveness of the banking sector. Of course, there is also a question of fairness. The banking sector has long been uncompetitive, and Ukrainian banks today earn excess profits. So the question of a 50% tax can be discussed. Some see it as fair, others as unfair — understandably, depending on which side of the barricade they stand on. But this logic of unfairness will spread wider.

In another proposal, the Ministry of Finance suggested extending the 50% tax on bank profits into 2027. The tax committee supported it. From 2028, the rate is planned to return to 25%. Perhaps. But when the state has a hammer in its hands, everything starts looking like a nail. Remember this habit of the state — it will return in the section on drones and MilTech.

Recall the Laffer rule: from a certain point onward, higher tax rates do not bring in more money, they simply destroy the tax base. Examples from Sweden in 1984–1991, France in 2012–2014, the United Kingdom in 2010–2013 and the United States in 1990–1993 showed how governments experimented with higher taxes in specific areas and ended up collecting less.

In Ukraine, the real burden on one hryvnia of salary looks like this. The taxpayer pays 23%: 18% plus 5%. The employer pays a further 22% social contribution on top. In total, this is about 37% of the full cost of labor before the person buys anything. Then, when the money is spent, there is 20% VAT, excise duties on tobacco, alcohol and fuel. Add the hidden tax of double-digit inflation, which devalues both wages and savings. In the end, the burden clearly exceeds 50%.

To simply stand still, people have to earn more and more. The current budget problem is that rising tax pressure forces people to work more and longer just to preserve their current standard of living.

Previously, in response to higher taxes, businesses and individuals went into the shadows: cash, P2P payments, various bypasses. Now this is harder. Banks ask: where did this UAH 15,000 come from, what is this UAH 20,000? Ukrainian banks have already switched to international rules. The tax service sees more and more of citizens’ and companies’ income. From 1 January 2027, the tax service will regularly receive information not only from OnlyFans, but also from other international platforms where Ukrainians sell something or try to earn extra income. Hiding is much harder today. Taxes will have to be paid.

But European-level taxes in a country with a demographic catastrophe and a volatile investment climate hit exactly those who create GDP. People leave, businesses leave, the tax base shrinks. In response, the state raises taxes further and expands the tax base, pushing even more people and businesses out of Ukraine.

To avoid making the tax block sound one-sided, there is a fresh nuance that I hope will matter. The state is not only tightening screws; it is also trying to hang a carrot for long-term household investments. Draft law 15314 on personal investment accounts has been registered in the Rada. The idea is simple: a resident opens one special account and invests through it in Ukrainian capital-market instruments. If the money stays there for at least 1,095 days — nearly three years — investment income, dividends and interest are not taxed. Withdraw early, and the benefit disappears; you pay in full.

The account may be topped up by up to EUR 10,000 per month. One account. Ukrainian instruments. Investment firms act as tax agents and report to the tax service. In essence, the state is offering a good deal: give the economy long-term investment, play by the rules, operate above board, take Ukrainian risk — and I will not touch your investment profit.

This is international experience. It has worked in other countries and may work in Ukraine. I hope the law is passed. It could genuinely revive Ukraine’s capital market. But it is important to remember: zero tax does not mean zero risk. And for now, this is only a draft law, not a law.

Even with all these tax increases and the expansion of the tax base, the budget still does not balance. All the tax fine-tuning gives around UAH 120 billion in 2027, while the budget deficit is about UAH 2 trillion, roughly 18% of GDP. Interestingly, this deficit includes military spending of UAH 2.8 trillion in 2027, against UAH 4.4 trillion in the current year. In other words, the authorities are building into the budget an assumption that there will be no war next year. If the war continues, real military spending will be higher, and so will the deficit.

Without Western aid, it simply does not work. A UAH 2 trillion deficit is roughly USD 40–45 billion. Who can cover it? Only the European Union.

Imagine a family that spends almost one-fifth more than it earns every year. Where does this deficit come from? From the war. Taxes cover the civilian part of the economy. The military part is covered by EU assistance. Europe may describe it differently, but the reality is what it is.

What does this mean for us? If we operate above board, we are prey for the fiscal system. What should business do? Raise prices, because otherwise where will the money for higher taxes come from? Business passes taxes on to consumers, which will raise inflation. But not everyone will survive: not all consumers can pay higher prices.

4. The Debt Mountain and the Currency Mine

The hole in the budget is covered by borrowing. Ukraine’s public debt has already reached historical highs and exceeds GDP. In the latest budget declaration, the government itself projects debt rising to about 106% of GDP by the end of 2026 and 113% of GDP by the end of 2027. The country owes more than it produces in a year.

The danger is not only the size of the debt, but its structure. Seventy-nine percent of Ukraine’s public debt is denominated in foreign currency: euros and dollars. Taxes are collected in hryvnia. The European Union is now the main creditor, accounting for about 40% of the debt. Ukraine is tied to the EU. Whoever pays calls the tune.

As long as the hryvnia exchange rate is stable, everything is fine. But once the hryvnia weakens, the debt rises in hryvnia terms, even if nothing changes by a cent in dollars. We expect the hryvnia to weaken this year at least to UAH 46 per dollar. This is a market forecast, not a prophecy. From a market perspective, the hryvnia should probably be weaker, perhaps UAH 50 per dollar, but it is being restrained. The National Bank has reserves to contain devaluation.

There is also a budget logic here. Most aid arrives from abroad in foreign currency, especially in euros. It is useful for Ukraine to devalue the hryvnia slightly, convert foreign aid at a higher exchange rate, and cover a larger part of the budget hole in hryvnias.

What is telling is that even in the optimistic scenario — where the war ends next year, or perhaps by the end of this year — further weakening of the hryvnia is still built in. The average exchange rate rises from UAH 44 per dollar to UAH 51 by 2029. Of course, this is wishful thinking. I think things will be different: either better, if reconstruction begins, the system does not obstruct it, significant foreign currency enters the country and the budget deficit falls sharply; or worse, if the war continues, the system continues to loot the economy and all the traditional problems surface again.

In any case, a weakening hryvnia is now the baseline plan. Managed devaluation helps exports, but it also makes public debt more expensive.

There is no need to shout that everything is lost. This is not an apocalypse. A significant part of the debt — the same 40% EU loans — is structurally supposed to be repaid from future Russian reparations, not from the pockets of Ukrainian taxpayers. If these obligations are stripped out, cleaned debt stabilizes around 81% of GDP. So 106% or 113% is not the end of the world. The debt is large, too large. Ukraine can handle 40% comfortably; 80% is a lot, and it will need to be reduced somehow. But this is not a hopeless spiral. The key is that Russia pays for what it destroyed.

If we combine the tax and debt blocks, the picture is this: the state is simultaneously squeezing a shrinking tax base and borrowing more. Why both? Because war costs more than the country can produce. Taxes are the internal blade. Debt is the external one. These are the two gates of one fiscal trap. The whole structure holds only as long as money comes from outside.

What does this mean for us? A currency cushion is not love for the dollar. It is insurance against the way the country’s own debt is structured. If Ukraine depends heavily on international aid, we need that kind of insurance too. Foreign currency is a must-have for anyone whose savings cover more than one or two months.

5. The Old Economy: Grain, Metal, Ports

Before the war, Ukraine’s old economy stood on three pillars: grain, metal and transit. This base has not disappeared. During the war, it has become even more important, although transit is now practically absent. Grain and metal remain the foundation of foreign-currency earnings.

Agricultural exports are the main source of foreign currency, more than half of all exports. That is the same currency in which Ukraine’s public debt is denominated. But now grain is no longer just grain. It is ports, air defense, insurance, logistics, electricity and the political will of partners to keep the maritime corridor open.

All iron ore and more than 90% of agricultural exports go through three ports of the Odesa hub. These are precisely the targets Russia has been hitting in recent months. Russia has sharply increased strikes on port infrastructure, grain terminals and sunflower oil storage facilities.

The result is already visible in exports. Grain exports by mid-May were down by around 16%. Iron ore exports in the first months of the year fell by more than 30%. The largest agrarian association says that the situation in Odesa region ports has reached a critical point.

Why does this hit far beyond the elevators? Exports through ports fall — foreign-currency inflows fall. Less foreign currency means a weaker hryvnia. It becomes harder to pay for imports: fuel, weapons, equipment. The World Bank estimates the recovery needs of the transport sector at almost USD 96 billion, and about 60% of those losses are linked precisely to disrupted access to ports.

The old economy has not disappeared. It has become very vulnerable and has turned into another military target.

What does this mean for us? The stability of the hryvnia and the availability of imports literally rest on three ports under constant attack. This is another argument for currency diversification and against betting that the exchange rate will always remain more or less the same.

6. Energy: The Most Important Economic Front

There is one force that can neutralize a port, a factory and the budget overnight. These are strikes on energy infrastructure. This is probably the most important economic front of this war.

Russia has been systematically striking Ukraine’s energy sector since the first year of the war. According to the International Energy Agency, about half of Ukraine’s generating capacity was destroyed, damaged or left in occupied territory as early as 2022–2023. This is not collateral damage. It is a direct Russian strategy: knock out the support of Ukraine’s economy and freeze people and the economy in winter.

In autumn 2025, strikes shifted to gas. After attacks in October, about 60% of Ukraine’s domestic gas production was taken offline. Gas in winter means heating. That means gas must be purchased urgently abroad, in dollars, inflating the deficit and foreign-currency debt.

We return to the opening image: 9.5 hours without electricity in Kyiv in December is part of the energy front. In everyday winter life, peak consumption requires about 18 GW. At best, 12–13 GW is currently available. The gap is closed by imports and power cuts. Elevators stop, water disappears, businesses switch to generators and pay very high tariffs.

The IMF and the National Bank cut their economic growth forecasts to 1–1.5%. The number one official reason is the degradation of the energy system. A factory that stands without electricity for one-third of the day produces nothing. This is not an abstract risk. It is a direct subtraction from GDP.

One force hits from four sides at once: it slows growth; pushes up import costs and the foreign-currency deficit; requires money for restoration; and determines how people live every day.

Yes, Ukraine has adapted. It is not only generators, but also batteries. I have two EcoFlow units myself, and they can keep my home running for a day. Ukraine increases imports from the EU, builds a new line with Romania, reinforces nodes in the grid. Air defense and the power system have proven more resilient than many expected, including in Russia.

But a resilient system is not a healthy system. Each winter is now a game of survival, not recovery.

What does this mean for us? A generator and a battery — both in a business plan and at home — are no longer insurance just in case. They are a cost item. Any business model in Ukraine must now include the price of autonomous energy. And that is not small change. Those who do not account for it risk going under, as many cafes and restaurants did this winter.

7. The New Digital Tiger: IT and MilTech

If the old base is under attack, what can Ukraine grow on today? Ten years ago, the answer was almost obvious: IT, the digital tiger. It seemed Ukraine would overwhelm the world with its IT, and that this would become the main export sector. But 10 years have passed.

IT has not died. In 2025, exports of IT services grew by 3% to USD 6.6 billion. That is below the 2022 peak, but it is not zero. Many IT specialists have left, many were laid off, and IT’s share of the economy fell from 4.4% to 3.9%. Not because IT collapsed: the sector is resilient and adapts. Other sectors are simply growing faster today.

In four years, Ukraine has built a defense industry with capacity of around USD 50 billion. That is roughly fifty-fold growth: about USD 1 billion in 2022, USD 3–6 billion in 2023, around USD 10 billion in 2024, USD 35 billion in 2025 and an expected USD 50–55 billion in 2026. Today, Ukrainian producers cover more than half of the army’s needs.

And here the loop from the beginning returns. The industry called the largest in the country is MilTech. There is no tragedy in this — there is a chance. In four years, Ukraine has done what normal countries need decades to do: built a new industry on pain, drive and anger.

These are no longer IT specialists writing code for foreign corporations. These are engineers who redesign a product within a week because yesterday it did not survive at the front. This is research not in a laboratory, but on the line of contact. A terrifying competitive advantage by its nature, but a competitive advantage nonetheless.

It is no longer only about defending the country itself. In 2026, Ukraine began exporting defense technologies: 10 export hubs are opening in Europe, drone assembly lines are being launched in Germany and Britain, and almost every day there is news of new agreements. The model is unusual: what is sold is not a finished product, but a living ecosystem — production blueprints, engineering, and a feedback loop from the front. A new digital tiger, but in uniform.

But this engine has an enemy that cannot be shot down by a drone. And it is not Russia. It is permits, licenses, taxes and the fears of officials who do not want to release such a convenient and profitable tiger from their control. The habit of the state to control everything first and think later has not disappeared. If anything, the war has strengthened it into a reflex.

The mechanics are specific: it is almost impossible to obtain permission to export drones and dual-use equipment. Small companies burn through money and fail before reaching the market, even though foreign demand is growing. The authorities are also discussing a tax on defense exports.

Why are the largest and the most fragile the same industry? Give the sector air to breathe, predictable rules and export freedom — and you get access to capital and an export engine with high value added. The defense sector is one of the most profitable sectors for any national economy. Countries fight for it and hold onto it. Europe is rearming and needs cheap, combat-tested technologies.

But if barriers, dependence on state procurement and extra taxes win, the champion will be strangled in the cradle. The engine of the economy already exists. The only question is whether the system will let it run — or try to pocket it, as usual.

8. The External World: The EU, Money and the Pain of Rules

The final force influencing this is the external world.

On 15 June 2026, the European Union officially opened the first negotiation cluster on accession with Ukraine and Moldova: rule of law, the judiciary, public procurement and financial control. The door that had been locked for two years officially opened slightly. This was an EU decision, but politically it became possible only after Hungary lifted its blockade. The key to European integration opened in Budapest after the elections.

Here, I want to stress not the phrase “we were accepted,” but something else. For the economy, the EU is not blue flags with yellow stars at press conferences. It is rules, money and pain.

When Ukraine decided in 2013 to move toward the European Union, it was a decision to move toward European rules. If Ukraine had chosen the Customs Union — the sardonic “taiga union” — with Russia, it would have meant Russian rules. Ukraine chose European rules. Not the officials, many of whom are now on the run or God knows where, but the country.

Why is this important? Courts, corruption, public procurement, competition — all of these stops being an internal Ukrainian dispute and becomes a ticket into the club of normal business.

Money — because without the European anchor, honest private capital will not come for reconstruction. Pain — because some old schemes will simply not survive closer alignment with the European Union. European integration is not simply “we were accepted.” It means “we will be forced to become a different country.” That is not a slogan. It is money with conditions.

The EU’s EUR 90 billion loan consists of EUR 30 billion in economic assistance and EUR 60 billion for the defense industry. The loan is expected to be repaid from future Russian reparations. The military budget and the deficit are covered by reparations.

The sober part is this: the Hungarian example itself suggests that Ukraine’s path to full membership may take 10–15 years. There is no accelerated fast track. A veto can theoretically return. This is a marathon, not a sprint.

What matters is not to fall into apocalypse-thinking. Ukraine is not a country pretending to be a state, as the Kremlin tries to present it. The banking system, usually the most sensitive to military risks, remains profitable, liquid and well capitalized. Non-performing loans are near historical lows. Banking regulation is already almost 78% aligned with EU norms, and the insurance sector around 55%, with a plan to reach EU standards in 2028.

This is not a picture of a collapsed country. Ukraine is a far more complex structure: a country that is simultaneously fighting, borrowing, reforming, repairing energy infrastructure and building a defense industry. That is why Ukraine is so difficult to analyze. It is not black or white. It is alive.

Who Pays for All of This

Now that we have gone through all the forces — war, demographics, taxes, debt, the old economy, energy, MilTech and the external world — it is time to bring them together.

Let us return to the riddle from the beginning: if everything is stable, why does the elevator not work in winter, and why does a cafe fill its generator with diesel?

The answer is this: stability exists, and Ukraine really is holding. But it is not holding by itself. The external world supports us with EU money secured by Russian assets; taxpayers support us with higher taxes; businesses with higher costs; families with emigration and health; future generations with debt; and the state with dependence on the European Union.

Remove any one of these hands, and the rope on which the tightrope walker is moving will swing. It may swing painfully.

Recall the USD 588 billion needed for recovery. Neither taxes, nor EU loans, nor debt alone can cover this amount. Who will organize the banquet for USD 588 billion? The math works only if three sources are combined: frozen Russian assets, stable Western grants and private investment.

Frozen Russian assets are about USD 300 billion, but the European Union has already carved out more than EUR 90 billion for itself. Ukraine may receive USD 100–200 billion in the best case. That is clearly not enough. Stable Western grants? The United States is not burning with desire. Europe may provide some. Private investment will come only with security guarantees and a clear investment climate. Private capital enters when it is profitable.

Ukraine’s reconstruction is not a question of construction projects. It is a question of who will invest the money.

According to the head of the National Bank, external assistance will decline: EUR 53 billion this year, EUR 42 billion next year, EUR 22 billion in 2028. The drip is being gradually removed. Private capital must replace it. And private capital needs infrastructure, rules and security. Everything again comes down to the question of peace.

In the 2027–2029 budget declaration, the Cabinet of Ministers built two official scenarios: the war ends, or the war continues. Judging by the numbers, the baseline scenario chosen is the end of the war. It includes UAH 2.8 trillion in military spending in 2027 and a reduction of the budget deficit to 5.5% of GDP by 2029. Faster economic growth is expected.

But even in this case, public debt remains high, the hryvnia devalues, and even under a ceasefire the situation will not be easy. Debts will not disappear, and who will finance Ukraine’s reconstruction remains unclear. The exchange rate will also depend on this.

Three Scenarios

The first scenario is frozen uncertainty. There is no settlement, the war smolders, strikes on energy continue, Ukraine’s debt creeps up, demographics bleeds, MilTech grows but remains locked by the system and lack of money. In this case, the economy is stable, but stable on a drip. Growth is 1–2%, and any shock shakes the rope. The share of the military economy grows, the share of the civilian economy declines. This is essentially a continuation of what we see today.

The second scenario is managed ceasefire plus reconstruction. This is the optimistic scenario: a freeze along the current line of contact, security guarantees, a slow flow of reconstruction money, partial return of people, faster European integration, MilTech shifting toward exports and civilian technologies. This is the scenario of rebuilding anew, of reassembling Ukraine. But even here, the USD 588 billion for reconstruction is covered only through Russian assets, grants and private investment backed by state guarantees. Without peace, it does not start.

The third scenario is breakdown and Western fatigue. The United States has already stepped aside. Europe is still with us, but elections are coming next year, and international assistance could be cut or politics could turn. If AfD comes to power in Germany, if the right comes to power in France and other countries, the financial drip may be cut. Then a fiscal crisis, forced devaluation and the activation of the currency mine became possible- the mine consisting of the huge foreign-currency public debt, 79% of it in foreign currency. Then there would be a new wave of Ukrainian emigration and new budget problems. This is a tail risk, currently unlikely, but with severe consequences.

We hope for scenario number two: ceasefire, reconstruction, the restart of the Ukrainian system and integration into the European system. Yes, Europe has problems too, but we would be happy to have their problems. We prepare for scenario number one: what is happening now continues, meaning we must prepare for a difficult winter. And we keep scenario three in mind just in case: if governments in Europe change and support is switched off, then Ukraine will have to either negotiate peace on the enemy’s terms or face a real mess.

What to Do Personally: Money, Savings, Real Estate

What should we do with all of this as investors and savers? This is a framework for your own decision, not investment advice, because I do not know everyone’s personal situation.

The main conclusion is that a country with foreign-currency debt, external dependence and a demographic hole does not forgive concentration of capital. Do not keep your whole life in one currency, one banking system, one apartment and one hope for a state pension.

The currency in which you save should match the currency in which you will spend. Personal retirement capital, in a country where there is one worker for one pensioner, is no longer a luxury. It is a necessity.

Are reconstruction and defense interesting for investment? Perhaps. The potential is large. But for a private investor, this is still illiquid, difficult to access and too risky. Watching is interesting. Betting your pension on it — not now. I hope personal investment accounts will be launched, and normal rules of the game will appear for MilTech and private energy. There are many opportunities there, but this also requires systemic reforms, including guarantees of investor rights. Then it will become interesting for investment.

Hryvnia-denominated domestic government bonds are a good savings instrument if you live in Ukraine. For long-term investment, no: devaluation risks have not disappeared.

Real estate is Ukrainians’ favorite way of saving. The logic has always been simple: money appears — buy square meters. So far, the market supports this belief: in safer regions and in Kyiv, prices are not falling but rising by 10–15% per year. Yet I already hear from realtors that the market has stalled, demand has frozen.

Here the same problem returns: the more taxes the state collects, the harder it is for people to accumulate savings. Fiscalization grows, rules for cashless and cash transactions become stricter, all of these limits demand. Demand is currently supported by state programs such as eOselia and by shortages caused by destroyed housing. But a new quality standard has appeared: apartments that work during blackouts, with backup power and water, sell faster and at a higher price. There are few such apartments. The main housing stock is Khrushchev-era blocks and panel buildings. Demand there is very different.

The real estate market is no longer uniform. A square meter can vary greatly in price depending on location and building. In Ukraine, the situation has become more difficult because of demographics. Kyiv absorbs people from frontline cities, villages and small towns that are literally becoming depopulated. In Kyiv, perhaps buying still makes sense: Kyiv survived the Mongols. With other cities, the question is more complicated.

Under a ceasefire, there may be a burst of deferred demand of 15–20%. Under escalation, the opposite. Any currency destabilization also reduces demand.

The key point about real estate is this: psychologically it feels reliable, like a brick. But it is illiquid. You cannot take it with you. It is immovable property — literally immovable. You cannot sell it quickly in a country with war, foreign-currency debt and a demographic hole. Keeping all savings in real estate is a bet on hope, not a calculation of safety.

To Return or Not

The most personal question is whether to return or not. I will deliberately not answer it. This is about your safety and your family. Neither I nor anyone else has the right to decide for you.

But honestly, waiting for perfect clarity is pointless. It will not come. The decision will have to be made in fog, weighing many factors: the trajectory of security; the question of a ceasefire; income in Ukraine; whether you have work there; whether you have work in your country of residence; what you think about your children, where they will study better and where the quality of education is higher; what comes next; whether taxation in the West or in Ukraine suits you better; the timing and terms of temporary protection in the EU; the mobilization situation; family; housing; 14% of Ukraine’s housing stock is damaged; schools; children’s integration; and, honestly, in which country you want to spend the lion’s share of your life.

This is a complex question. The grass is always greener elsewhere. If you travel and speak with people, you will see that in many countries life is not better than in Ukraine. Every country has its own oddities. Ukraine is not the worst country in terms of geography, climate and many other parameters. Because of the large demographic hole, there is no problem finding work here. Yes, there may be a problem finding work you like. Ukraine still has good education and good medicine, although there are problems too, and not all reforms are moving things in the right direction.

All expectations of Ukraine’s recovery rest on the assumption that roughly half of those who left will return. But there is the psychology of the window: the longer a person lives abroad, the smaller the chance that he or she returns. Children settle into local schools, a person finds work, grows roots and gets used to life there.

The deeply personal decision “to return or not,” multiplied by millions of people who have left, is demographics. Macroeconomics is the sum of personal choices made by millions of people — those who left and those who stayed.

I am often asked about my expectations regarding the war. Honestly, no one knows when it will end. Different sides have different interests and different capabilities. We must be ready both for the war to end this year and for it not to end for another 10 years. We must be ready for everything.

That is why the question today should be different: when reconstruction begins, who will live in this rebuilt country? Who will pay taxes? Who will repay the debts accumulated during this war and under previous presidents? Who will own the assets when reconstruction begins?

Ukraine is holding. But stability does not mean that everything is fine. Ukraine is changing and reforming, but that also does not mean everything is good and predictable. Ukraine can become one of the most interesting reconstruction stories in Europe, but only if people, money, energy and, most importantly, the system prove stronger than fatigue, debt and fear — and want to live in a new country.

In my view, Ukraine’s main enemy is the system. If it changes, I will be calm about Ukraine’s economy and about us. Then everything will be all right.

May peace come soon, and may Ukraine win.