By KYIV. Nov 18 (Interfax-Ukraine) – Massive Russian missile strikes on the Ukrainian energy infrastructure, which began in October, stopped the trend of slowing down the decline in the Ukrainian economy, its forecast for the year has been worsened from 32% to 35%, the ICU investment group reports in an updated macroeconomic forecast.
"After a 45-50% fall in GDP in the first months of the war, it began to recover due to improved security of the population and improved logistics. However, the destruction of the energy infrastructure due to massive missile strikes may become the new normal for the country in the coming months. Real GDP will remain at 35- 40% below the pre-war level in the coming quarters," the document says.
The ICU believes that power outage will be a key economic issue for the government in the near future.
The investment group recalls official estimates, according to which about 40% of all infrastructure was damaged, as well as the fact that power outage remains frequent and prolonged in eight regions of Ukraine, which accounted for 55% of GDP before the war.
"We do not expect a quick or significant economic recovery in 2023 due to a combination of weak domestic demand and logistical constraints on exports. We forecast moderate GDP growth of 4% next year," the report says.
The ICU clarifies that the forecast for 2023 assumes a significantly lower intensity of hostilities, an improvement in the security situation and a gradual return of Ukrainian refugees from abroad, but does not take into account any significant reparations or foreign direct investment.
The investment group expects that the influx of foreign loans and grants will provide the NBU with sufficient resources to continue significant volumes of interventions in the foreign exchange market while replenishing international reserves. As a result, the official hryvnia exchange rate will remain at UAH 36.6/$1 at the end of this year, while next year it will devalue by only 10% and reach UAH 40.2/$1 by the end of the year, while international reserves will increase from $27 billion to $35 billion. Earlier, analysts expected the rate of UAH 40/$1 at the end of this year and UAH 45/$1 at the end of the next year.
Regarding inflation, the ICU notes that it continues to accelerate, but will peak in February 2023, and then turn around and reach 24% in 2023 against 30% this year.
