The Ukrainian economy will contract this year for the first time since the start of the full-scale invasion, the central bank said, as Russia escalates airstrikes against civilians and businesses.

The gross domestic product will shrink by 0.4% in 2026, compared with a previous forecast for 1.8% expansion, according to updated economic projections released by the National Bank of Ukraine on Thursday. This would mark the first contraction since 2022, when the GDP fell by more than 30%.

Moscow has been trying to cripple Ukraine’s economy with attacks on factories, retailers and cargo ships carrying grain in the Black Sea. The aim has been to break the population’s morale, deprive the country of the ways to finance its defense effort and to increase costw for key western backers.

“Russia’s attacks have led to a sharp fall in business activity, and losses in economic potential will constrain recovery,” the central bank said in the statement. It expects the economy to rebound by 0.4% in 2027, driven by increased investment in the defense industry and other projects.

A drone strike on a railway station in Dnipro, Ukraine’s third largest city, killed at least 13 civilians on Thursday. Epicentr, a major home improvement retailer, said this week its business had been “destroyed” by a rapid-fire succession of Russian airstrikes on its distribution centers. Grain exports from Ukraine dropped by 32% since July compared to last year, according to the Agriculture Ministry.

The central bank on Thursday raised its key policy rate as its updated economic forecasts also showed inflation is going to accelerate more than previously expected.