May Economic Review in 2026. How can Ukraine effectively use €60 billion in EU defense aid?

Since March 2022, the Centre for Economic Strategy (CES) has been preparing monthly reviews of Ukraine’s economy during a full-scale war.  The special topic of the May review is: «How can Ukraine effectively use €60 billion in EU defense aid?».

All previous reviews can be found under the link.

Key changes in the Ukrainian economy in May:

Sectoral analysis: Real GDP fell by 0,5% in Q1 2026 amid the energy crisis during the heating season. The energy situation remained stable in April – May, supporting business and consumer confidence, but the 2026 forecast worsened in response to the war in Iran. Metallurgy production fell in April due to EU regulations. However, current harvest expectations remained good amid higher humidity.

Monetary sector: Inflation in April 2026 reached 8,6% y-o-y, up from 7,9% in March, and rose by 1,4% m-o-m. The NBU revised its forecast, expecting a 1,9 pp higher inflation by the end of 2026 than had been anticipated by the previous report in January. The change comes in anticipation of higher production costs, associated with the effects of increasing fuel prices. Further currency restrictions were relaxed, aiming to support businesses and the Armed Forces.

Fiscal sector: Middle East crisis still impacts the budget аnd it reflects on revenues – they are growing. However, domestic revenues are insufficient to cover all budgetary needs, so international support remains crucial. War expenditures increased significantly in March compared to winter. Despite this, in Q1, war-related spending was relatively lower than last year. This indicates lack of resources. Therefore, amendments to the Law od State budget will be made, funded by the Ukraine Support Loan.

Special topic: €60 bn defence support is a part of €90 bn Ukraine Support Loan. The loan is split between direct budget support and defence industrial funding across two years. Goal of the €60 bn support: give Ukraine a qualitative military edge. The €60 bn can fund two broad categories of defence products. Ukraine nominally decides what to buy, Nothing moves without the European Commission approval and member state cooperation.

See our report below for further details.

This event has been funded by the UK International Development from the UK government; however, the views expressed do not necessarily reflect the UK government’s official policies.