In the IMF, a negative scenario for Ukraine was revealed: the war may last longer

Specialists of the International Monetary Fund have adjusted the negative scenario for Ukraine in case of an intensification of the war. According to this scenario, the war may continue until mid-2026.

This became known from the IMF Memorandum.

The negative scenario considers a longer and more intense war, as well as a more severe economic shock compared to the baseline scenario, which anticipates the end of the war in the fourth quarter of 2025.

The cumulative external financing gap in the negative scenario amounts to $177.2 billion compared to $148 billion in the baseline scenario. The forecasts for the key macroeconomic indicators in this scenario are significantly worse than in the baseline scenario, indicating a reduction in real GDP, followed by a slow recovery and higher sustained inflation.

The scenario assumes that the shock will start in the first quarter of 2025 and will have a strong impact on business and household sentiment, as well as the pace of migrant returns, causing further serious damage to energy infrastructure and power outages compared to the baseline scenario.

As a result, real GDP growth will be weaker than in the baseline scenario, that is -2.5% in 2025 (compared to 2.5-3.5% in the baseline scenario).

Significant defense needs and weak economic activity will cause a further increase in the budget deficit in 2025-2026. Imbalances in the foreign exchange market will reappear and are expected to last longer due to deteriorating export performance.

Future production recovery will be slower than in the baseline scenario due to even greater damage to fixed capital, worsening labor dynamics, and weakened financial balances, leading to a lower level of production compared to the pre-war period for a longer time.

The current negative scenario foresees some convergence with the baseline level in the medium term due to factors such as EU accession, reverse migration flows, and private investments.

"Overall, the extensive discussion with the authorities on contingency plans during the sixth review confirms that the program remains robust even in this negative scenario. The authorities’ very strong political commitments and their experience, as well as renewed financial guarantees from international partners and the expected reduction in debt burden, give confidence that even in this updated negative scenario, the program’s goals of maintaining macroeconomic and financial stability, restoring debt sustainability, and ensuring medium-term external viability can be achieved," IMF specialists emphasize.