The Ukrainian Defense Industry Will Be The Driving Force Behind The Postwar Economy
- 25.08.2026, 11:25
Transform technological expertise into export potential.
Ukraine’s defense industry could become one of the main drivers of the country’s economic recovery after the war ends. The industry’s production capacity in 2026 is estimated at approximately $55 billion, compared to $1 billion before Russia’s full-scale invasion, according to CEPA.
Over more than four years of war, Ukrainian companies have developed and tested a large number of low-cost drones, missiles, and interceptors on the battlefield. Now Kyiv hopes to turn this accumulated technological expertise into export potential by supplying the developed systems to Western countries and states in the Middle East.
The authors compare a possible development model for Ukraine to that of Israel, which used its military experience to build a high-tech economy and promote its own defense products on global markets. At the same time, Ukrainian industry faces a number of serious challenges.
In particular, the industry is hampered by bureaucracy, corruption risks, and complex procedures for approving export contracts. According to Tamar Jacob, an expert at the Progressive Policy Institute, Ukraine needs to reform its regulations to accelerate the production and export of weapons.
“Success will be determined not only by the market but also by policies favorable to arms exports,” the authors argue.
A labor shortage could become a problem. The government estimates that the postwar economy will need 4.5 million workers. At the same time, millions of Ukrainians are living abroad, a significant portion of whom do not yet plan to return until the war ends.
It is precisely young professionals who have gained work experience and established international business connections in Europe who may prove particularly important for the development of the defense industry.
However, their return could create social tensions. Ukraine will have to decide how to balance support for returning citizens with benefits for veterans who fought on the front lines.
It is personnel policy and reforms that will determine whether the Ukrainian defense industry can turn the experience of war into the foundation for long-term economic growth.
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