Between economic slowdown and budget architecture review: Parliament seeks future in the bowels of the earth during GDP decline
Ukraine has found itself at a point where models of post-war recovery collide with the current economic reality, which is becoming increasingly harsh. When international financial institutions record a slowdown in growth, and forecasts are revised downwards, the state launches mechanisms designed to work in the medium and long term. Among them is the idea of creating a recovery fund from revenues from the use of subsoil, provided for in the new agreement with the United States. But the key question is not how ambitious the initiative is, but whether it is commensurate with the macroeconomic situation in the country. In conditions where the projected GDP growth barely exceeds 3%, will the strategic fund turn into a declarative structure without a real resource?
Adjusted EBRD forecast
The European Bank for Reconstruction and Development (EBRD) revised its forecast for the growth of Ukraine’s gross domestic product for 2025. If earlier the bank estimated the growth potential at the level of 3.5%, now it expects only 3.3%. This news, at first glance, is not fundamentally important. But even a slight decrease in expectations in the conditions of war and global economic turbulence carries important signals for Ukrainian economic policy, investors and international donors.
The EBRD directly attributes the forecast correction to two main factors — the ongoing war and the escalation of global trade disputes. The report notes that these factors put pressure on general economic expectations and force a review of the dynamics of development even in those countries that demonstrate relative stability.
For Ukraine, the reduction of the forecast to 3.3% looks like a signal: international partners see no reason for rapid improvement of the economic environment next year. It’s not just hostilities that block logistics, hold back investment and drive up security costs, but also external conditions, from the fragmentation of global markets to trade conflicts between the US, China and the EU.
The background for changing the forecast was the dynamics of 2024, which showed an obvious slowdown. In the first half of the year, the growth rate of Ukraine’s GDP was 5.0%, which created the impression of a gradual economic recovery. However, in the second half of the year, growth fell to 2.0%, and the annual total stopped at 2.9%. Such an amplitude between quarters is a symptom of fragility, which does not yet allow us to speak of stable positive dynamics.
The EBRD attributes the slowdown to three key factors: power shortages, poor harvests and acute labor shortages. Each of these has its own logic, but together they form a long-term pressure on production capacity and recovery potential.
Special attention is paid to the personnel crisis. The lack of labor is one of the most sensitive challenges for Ukraine, which is exacerbated both by mobilization and large-scale migration. In certain sectors of the economy, the shortage of personnel has become chronic. This not only restrains business development, but also limits opportunities for attracting investments, because international partners study not only macro indicators, but also the micro level of labor organization.
Another reason for the curtailment of growth is unstable energy supply. In times of war, energy infrastructure remains a target for attacks, leading to outages, reduced production and increased costs. Even those businesses that can operate are forced to adapt to erratic schedules, which means lost productivity and additional costs.
Another blow is a poor harvest. Agriculture, which remains one of the foundations of the Ukrainian economy, is suffering both because of the armed conflict and because of climate change. Bad weather conditions and destroyed storage and logistics infrastructure make stable exports impossible and limit foreign exchange earnings.
It should be noted that in the long-term perspective, the EBRD left the forecast for Ukraine’s GDP growth for 2026 at the level of 5.0%. However, this estimate is based on a key condition — the cessation of war. This means that no positive dynamics are possible without a fundamental change in the security context. Otherwise, even large amounts of international aid will not be able to compensate for losses due to constant risks.
The reduction of the EBRD forecast is, first of all, a challenge for the economic bloc of the government. The need to ensure macroeconomic stability, budget financing, implementation of cooperation programs with the IMF, as well as business protection from external and internal shocks are tasks that require both technical solutions and strategic vision. At the same time, the response to these challenges should not be a cosmetic adjustment, but a systemic modernization of approaches to development — from employment policy and the tax system to energy security and support for export-oriented sectors.
Therefore, the decrease in the forecast of Ukraine’s GDP growth from 3.5% to 3.3% in 2025 indicates the fragility of the Ukrainian economy, which, despite its stability, remains a hostage to war, labor losses, and foreign economic risks. And although 5% growth in 2026 looks attractive, it remains in the zone of a conditional method: only on condition of cessation of hostilities and stabilization of the systemic parameters of the economy. The government should consider this forecast as a red flag, not as a minor technical change.
Changes in the Budget Code against the background of deteriorating economic growth forecasts
The publicized lowering of Ukraine’s GDP growth forecast by the European Bank for Reconstruction and Development gives a new tone to other events in the country’s economic policy. One of these steps is the decision of the Budget Committee of the Verkhovna Rada of Ukraine to support draft law No. 13256 on amendments to the Budget Code in the first reading. According to the people’s deputies, they should ensure the implementation of the provisions of the intergovernmental agreement between Ukraine and the USA on strategic cooperation in the field of minerals.
This decision, adopted on May 13, 2025, potentially affects the strategic principles of budget formation for the following years. Combined with the EBRD’s forecast of weak economic growth, it gives an idea of the direction in which the state is looking for a resource for development — through rent from subsoil use, modernization of fiscal instruments and co-financing of infrastructure projects.
Changes to the Budget Code are needed to create a separate special budget fund, which will include part of the income from new licenses for the use of subsoil, as well as from the rent associated with the sale of products mined as part of new projects. It is not a question of revaluation of existing contracts, but rather of new agreements that will be concluded after the entry into force of the intergovernmental agreement.
The head of the budget committee, Roksolana Pidlas, noted that 50% of these revenues will go to the Reconstruction Fund, an investment instrument that should support development projects in the post-war period. Moreover, the main manager of the fund is expected to be the Ministry of Economy. This mechanism provides that the funds are accumulated in the special fund of the budget and further, according to the procedure, they are transferred to the Recovery Fund.
This approach is not new for countries with a resource base, it borrows the logic of stabilization or sovereign funds, which are formed at the expense of revenues from the exploitation of subsoil. The fundamental difference is only in the target purpose: the funds should not go to support the balance of payments or service the national debt, but rather to reconstruction, infrastructure initiatives and potentially to support key sectors of the economy. The approximate amount that Ukraine could accumulate in five years under this scheme is about 3 billion hryvnias. Podlasa provided such a figure hypothetically, if the agreement had been signed in 2019, by this time such an amount could have already been accumulated.
Given the updated forecast of the EBRD, which indicates a decrease in GDP growth to 3.3% in 2025, this draft law becomes more important. It is obvious that the government and the parliament are looking for ways to create sources of stable financing not through direct external borrowing, but through the consolidation of internal resources, including natural resources.
Under the conditions when the budget deficit remains high and international aid cannot cover all needs, the integration of the rent policy system into the long-term financial architecture of the state seems logical. Especially when it comes to involving the US as a partner in mining projects, which also involves increasing technological quality, transparency and environmental standards in the industry.
At the same time, the implementation of such changes is not without challenges. First, the amount of rental income itself may be limited in the short term due to the length of the licensing process, the need for geological assessment, site preparation and attracting investors. Secondly, the procedure for the formation and administration of a special fund requires transparent distribution and audit mechanisms to avoid repeating the fate of other “special funds”, which later turned into fiscal “black boxes”.
Thirdly, changes to the Budget Code are only one of the stages of the implementation of the agreement. After the first reading, the parliament will have to elaborate the text in detail, adjust the wording, agree with the Ministry of Finance and conduct a financial and economic examination. It is possible that some of the norms will meet opposition from political players who fear the concentration of resources in the hands of the government without parliamentary control.
The support of this draft law in the first reading is a signal to Washington that Ukraine fulfills its obligations related to the opening of access to the subsoil, transparent administration of revenues and strategic partnership. The successful implementation of the agreement with the USA can create a precedent for similar agreements with the EU, Canada or Japan — countries interested in strategic resources, in particular in the context of the transition to a green economy. However, at the level of domestic politics, this initiative raises questions about the effectiveness of long-term financial planning, the institutional capacity to implement such mechanisms, and the real will of the political class to create transparent resource management mechanisms.
Thus, in the context of a slowdown in GDP growth and a decline in economic development forecasts, Ukraine is trying to create a new architecture of financial mobilization. The draft law on amendments to the Budget Code for the purpose of implementing the agreement with the USA on subsoil is one of the first steps in this direction. He indicates the intention to rethink the sources of financing development and reconstruction. At the same time, its implementation will require not only political support, but also a high level of professional administration. And this is where the main risk and the main test of the maturity of Ukrainian institutions in the post-crisis period lies.
At the same time, this decision in itself is not able to quickly stimulate the economy in the short term. The volume of income will be limited due to the inertia of launching new projects, the complexity of licensing procedures, geological assessments and the attraction of foreign capital. In the context of a slowdown in growth, which has already been recorded by the EBRD, this can create the illusion of an additional resource where it does not exist yet, and divert attention from urgent macroeconomic needs – the budget deficit, the lack of currency, restrictions in the balance of payments.
That is, draft law No. 13256 is not a rescue tool against the background of the general slowdown of GDP in the state. Its effectiveness will depend on the ability of the government not only to create a formal fund, but also to ensure a transparent, independent, strategically managed policy on the use of mineral revenues. In the absence of such capacity, there is a risk that even a promising initiative will turn into an institutional burden with no real impact on the economy.
Against the background of deteriorating forecasts for the growth of Ukraine’s economy in 2025 — with the reduction of the EBRD estimate to 3.3% — the state is trying to intensify the search for internal sources of development. It is in this context that it is worth considering the Verkhovna Rada’s decision to amend the Budget Code for the implementation of the agreement on strategic cooperation with the USA in the field of subsoil. It is not only about formal corrections in budget legislation, but about an attempt to lay the foundation for a new model of economic recovery — through the conversion of natural potential into structural investments.
This decision demonstrates an attempt to reduce dependence on external financing and bring fiscal policy to the level of strategic partnership. In the case of successful implementation and transparent administration, such an initiative can become an answer to the current stagnation and a reliable pillar in the recovery of the economy. At the same time, the growth rates that the government hopes for are possible only if not only the end of the war, but also the clear, coordinated work of the parliament, the government, international partners and the institutional system of public finance management.
