The war may last longer: the IMF has released a pessimistic outlook for Ukraine.

Experts from the International Monetary Fund have revised their negative scenario for Ukraine in the event of a more intensified war. This scenario envisions that the war will continue until mid-2026.

This information comes from RBK-Ukraine citing the IMF Memorandum.

The negative scenario suggests a longer and more intense conflict, resulting in a more prolonged and severe shock to the economy compared to the baseline scenario, which anticipates the war concluding in the fourth quarter of 2025.

The total external financing deficit in the negative scenario is projected at $177.2 billion, compared to $148 billion in the baseline scenario. Forecasts for key macroeconomic variables in this scenario are significantly worse than in the baseline, indicating a contraction in real GDP followed by a slow recovery and higher, sustained inflation.

This scenario assumes that the shock will begin in the first quarter of 2025, significantly impacting business and household sentiment, as well as the pace of migrant return, leading to further extensive 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, estimated at -2.5% in 2025 (compared to 2.5-3.5% in the baseline scenario).

High defense needs and weaker economic activity will contribute to a further increase in the budget deficit in 2025-2026. An imbalance in the currency market is expected to re-emerge and persist for a longer period, given poorer export performance.

The subsequent recovery of production will be more restrained than in the baseline scenario due to even greater damage to fixed assets, worsening labor dynamics, and weakened balance sheets, resulting in production remaining below pre-war levels for an extended period.

The current negative scenario suggests some convergence with the baseline level in the medium term, supported by the anchor of EU accession, reverse migration flows, and private investments.

"Overall, extensive discussions with the authorities regarding emergency action plans during the sixth review confirm that the program remains robust even under such a negative scenario. The strong political commitments of the authorities and their track record, along with renewed financing guarantees from international partners and anticipated debt relief, instill confidence that even in this updated negative scenario, the program's objectives of maintaining macroeconomic and financial stability, restoring debt sustainability, and ensuring medium-term external viability can be achieved," the IMF experts note.

It is worth recalling that the IMF updated its baseline scenario, which predicts that Russia's war against Ukraine will conclude by the end of 2025. This scenario anticipates economic growth for Ukraine in 2025, accelerating to 5.3% in 2026.