Ukraine's central bank slashes growth outlook amid Iran fallout
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Ukraine's central bank slashed the country's growth outlook for this year by half a percentage point to 1.3%, as the war in the Middle East hits Ukraine's fragile economy as it emerges from the most severe energy crisis of Russia's full-scale invasion so far.
The bank forecast 1.8% growth in 2026 for Ukraine in January, but announced the drop to 1.3% on April 30 during a press conference to announce its key policy rate.
U.S.-Israeli strikes on Iran at the end of February have caused global energy prices to surge, after Iran retaliated by attacking oil and gas infrastructure across the region and targeting tankers traveling through the Strait of Hormuz, a key artery for global oil and gas flows.
Sea traffic through the strait has collapsed for over two months, causing energy crises in parts of Asia and fears that a protracted closure of the strait will cause the worst global energy crisis in history.
Ukraine's central bank also joined other global central banks in keeping its key rate unchanged, as the war in the Middle East causes a bump in inflation.
The National Bank of Ukraine held its rate at 15% on April 30, joining the U.S. Federal Reserve, Bank of Japan, the Bank of England, and the European Central Bank which all kept their rate unchanged this week.
Inflation in Ukraine had been on a downward trend from a peak in May 2025, but slightly rose to 7.9% in March, mostly due to rising energy prices and exceeding the central bank's expectations.
The bank signaled that it was ready to raise rates in the future, should prices spike further.
"In case of increased risks to price dynamics, the NBU will be ready to apply additional measures to contain inflationary pressure," the bank said in a press release.
The bank also said it expects to keep the rate at 15% until mid-2027. A higher key rate encourages saving over consumption, helping to tame inflation.
Ukraine's central bank targets 5% inflation.
