Medium-term country risk assessment for Ukraine

End-May 2025, the CMSR prepared a new medium-term country risk assessment for Ukraine, following its own country risk assessment methodology.

We classify Ukraine as a country with a very high medium-term country risk (E).

The CMSR assigns the assessed country to one of five risk categories:

·         A - Minimal medium-term country risk

·         B - Very limited medium-term country risk

·         C - Limited medium-term country risk

·         D - High medium-term country risk

·         E - Very high medium-term country risk

In addition to the final country risk assessment, each country risk category, i.e. political, economic and financial risk, is also classified into one of these five risk categories.

Ukraine's political risk remains very high in the medium term and will not decrease as long as the war continues. The political risk will decrease somewhat when or if a peace agreement is reached between Ukraine and Russia. This year's peace negotiations have not yet been successful. The risk of a final peace deal being delayed until 2026 is increasing, as is the possibility of a frozen conflict without a final peace treaty or a continuation of the current fighting. These risks will increase if the US withdraws from its role as mediator. Nevertheless, we believe that some kind of peace agreement will be agreed upon, as both sides are exhausted and need a respite. On the other hand, developments over the last month suggest the possibility that Russia does not consider the peace agreement under discussion sufficiently favourable to recognise its stronger position on the ground, and the Kremlin could decide to walk away from the peace negotiations and try to assert its advantage before Ukraine has a chance to strengthen its military. After the peace agreement, there will be elections in Ukraine, the outcome of which is difficult to predict due to many uncertainties. Zelenski currently enjoys high support among Ukrainians again, however, further support will depend on the terms of the peace agreement. Ukraine will continue its rapprochement with the EU, while NATO membership is not a realistic option for Ukraine. Other risks stemming from the political environment include endemic corruption, which is only gradually being eliminated, relatively weak institutional effectiveness and lack of government control over the whole territory due to the ongoing Russian occupation. On the foreign policy front, good relations with the EU and the US will be crucial for Ukraine's future. Ukraine’s relation with the US will be unpredictable if Zelenski remains in power due to the tensions between the two presidents.

The medium-term economic risk has decreased compared to July 2023 and is now high, while the financial risk has deteriorated slightly but remains high. Ukraine will remain dependent on international financial assistance in the medium term. Economic policy in the medium and long term will be geared towards the reconstruction of the country, the costs of which are increasing (currently estimated at USD 524 billion). The estimates and forecasts for macroeconomic indicators are based on the assumption that a peace agreement will be reached between Ukraine and Russia this year or next year, ending the fighting in the country. According to the EIU, GDP growth is projected to average 4.5% annually over the period 2026-2029, driven mainly by domestic investment and private consumption.

Political relations between Slovenia and Ukraine will remain good, and Slovenian companies will participate in the reconstruction of the Ukrainian economy. Slovenia will continue to defend respect for international law, to stress the importance of ensuring accountability for crimes committed and to work for a just and lasting peace in Ukraine, including as a member of the United Nations Security Council. Trade between the two countries is estimated to continue to increase as Slovenian exports to Ukraine increase; imports from Ukraine will remain modest. Slovenian companies are interested in Ukraine's post-war reconstruction, and we expect an increased volume of investment deals after the end of the war.

Ukraine Medium-Term Country Risk Assessment can be ordered at: info@cmsr.si 

More information: darja.zlogar@cmsr.si