The Institute for Economic Research and Policy Consulting (IER) continued to record a contraction in Ukraine's real gross domestic product (GDP) in February 2026, estimating a decline of 1.5% compared with the same period a year earlier.

According to the Monthly Economic Monitoring of Ukraine (MEMU) published on the institute's website, the IER revised its estimate for January's economic decline, whereas the previous MEMU issue put the drop in real GDP at 1.4%, the updated figure stands at 1%.

As for February 2026, the IER said that the contraction persisted due to destruction and damage inflicted by Russian drones and missiles on energy, railway, and other critical infrastructure.

In particular, the institute estimates that real gross value added (GVA) in the extractive industry fell by around 14% year-on-year in February due to disruptions in the extraction of gas, iron ore, and coal.

Electricity production and gas distribution declined by 14% (compared with 2025) as a result of extensive damage to energy infrastructure.

The IER also said that real GVA in manufacturing dropped by 7% year-on-year, primarily as a result of Russian attacks and problems with access to electricity. At the same time, several enterprises, including ArcelorMittal Kryvyi Rih, announced the suspension of certain capacities, which the company attributed to the European Commission's introduction, effective January 1, 2026, of the Carbon Border Adjustment Mechanism (CBAM) without exemptions or a transition period for Ukrainian producers, as well as to high electricity costs.

Growth in real GVA in trade is estimated at 2% year-on-year; however, this increase was driven by higher retail revenues and demand for fuel.

The decline in real GVA in transport is estimated by the institute at around 14% compared with 2025.

In addition, the IER said that the economic situation in March will likely be influenced not only by Russia's war against Ukraine, but also by the war in the Middle East.

"It has already led to higher fuel prices, although Ukraine had reserves and demand declined somewhat amid improved access to electricity in early March. At the same time, the situation may worsen in April, according to estimates. However, the war in the Middle East has increased demand for Ukrainian defense products, in particular drone interceptors," the institute said.

The IER added that, given stable demand for defense technologies and the already announced partial lifting of the export ban, such a situation could support economic growth. However, it noted that there is still insufficient information to fully assess the overall economic impact.