By KYIV. Dec 23 (Interfax-Ukraine) – Slowing harvests due to poor weather, continuing logistical and working capital constraints, and Russian shelling of energy infrastructure have worsened the prospects for the Ukrainian economy for the fourth quarter of 2022 and the first quarter of 2023, IMF experts have said.
"Real output is projected to contract by 40.5 percent y/y in 2022Q4, bringing the contraction for 2022 as a whole to 33%," according to the IMF staff’s central scenario under the Program Monitoring with Board Involvement (PMB), made public on its website.
According to it, in the first quarter of 2023, the decline will slow down to 34.5%, after which the economy will begin to recover: in the second quarter – by 6%, in the third – by 11.9% and in the fourth – by 21%, and in total for the year – by 1%, to 68% of the pre-war.
"The critical issue remains the scale. The next few months look extremely challenging due to sustained missile and drone attacks on critical civilian infrastructure. Accordingly, while staff’s central scenario assumes economic stabilization in 2023, the range of plausible scenarios is extremely wide. Uncertainties are exceptionally high, and it is important for the authorities to develop contingency plans so they can respond to shocks," the IMF said in the PMB documents.
According to them, the IMF has developed two more scenarios: negative – with a drop in GDP by 12.5% – to 57% of the pre-war level, and positive – with its growth by 10%, or to 75% of the pre-war level.
The unfavorable scenario assumes inflation of 40% (instead of 22.5% in the central), a decrease in international reserves to $18 billion ($21 billion), as well as an increase in state budget expenditures to 68.8% of GDP (56.5% of GDP) with an expansion of the deficit 16.8% of GDP (9.1% of GDP). Accordingly, this will require an additional $9.5 billion in budget financing to the base $39.5 billion.
