Ukraine’s Economy Shows Exceptional Resilience Four Years Into War with Russia

Four years after Russia launched the largest land invasion in Europe since World War II, Ukraine’s economy is defying expectations, demonstrating surprising resilience despite deep structural scars and heavy reliance on Western support.

When Russian forces seized parts of the southern Zaporizhzhia region in 2022, Ukrainian Armor, a domestic defense manufacturer,  lost two production sites. Yet the company has since rebounded. Chief Executive Vladyslav Belbas told the Financial Times that by 2026 the firm had ramped up production so sharply that its annual state contract for mortars was fulfilled in just six months.

“By 2025, we reached a point where the Ukrainian budget could no longer purchase everything domestic manufacturers were capable of producing,” Belbas said, a sign of the rapid militarization and adaptation of Ukraine’s industrial base.

The broader picture underscores the resilience of Ukraine’s business sector and macroeconomy. Despite the shock of the invasion by Russia, Ukraine avoided the kind of full-scale financial collapse and banking crisis that followed Moscow’s 2014 annexation of Crimea.

After a sharp contraction in 2022, Ukraine’s GDP has expanded each year since. The central bank expects growth to stabilize at 1.8% this year, with stronger gains projected in 2027 and 2028.

Dimitar Bogov, chief economist for Ukraine at the European Bank for Reconstruction and Development, said the pace may not be spectacular but remains steady “under extremely difficult conditions.”

Ukraine’s accelerated technological innovation, particularly in drone warfare, has surprised both allies and adversaries. A fast-growing ecosystem of defense tech companies has helped Kyiv offset Russia’s numerical military advantage with advanced unmanned systems, electronic warfare tools, and artificial intelligence-driven targeting solutions.

Dozens of firms have developed ground robots to supply frontline units, electronic countermeasures to neutralize Russian drones, and autonomous UAV systems capable of independent navigation and strike missions.

Yet economic recovery remains uneven. Real GDP is still 21% below 2021 levels and more than 40% lower than in the early 1990s. The country recorded a current account deficit of nearly 15% of GDP last year, and inflation is projected to reach 7.5% in 2026.

Western financial backing remains essential to sustaining Ukraine’s public sector. In December, leaders of the European Union approved a €90 billion loan package to cover Kyiv’s financing needs for two years. However, Hungary opposed using the EU budget mechanism to raise the funds, a dispute that could affect a new $8.1 billion loan agreement with the International Monetary Fund expected to be signed next week.

“Without support from the EU and the IMF, Ukraine’s economy would likely have collapsed, or at least would not have demonstrated such resilience and recovery,” said Maksym Samoyliuk, economist at Kyiv’s Center for Economic Strategy.

Four years of conflict have permanently reshaped Ukraine’s economic landscape. Large swaths of the east and south, including fertile agricultural land and heavy industry hubs, have been devastated or occupied. Exports from key sectors such as agriculture and metals have declined, while millions have fled the country.

An estimated 7 million people have left Ukraine due to Russian advances, and another 3.7 million are internally displaced. A November survey by the European Business Association found that 74% of business representatives reported significant operational challenges linked to displacement and workforce shortages.

Still, some wartime transformations may become long-term economic strengths if stability returns. The emergence of a sophisticated defense-tech sector, combined with institutional reforms and deeper integration with European markets, could lay the foundation for a more modernized and innovation-driven economy.