By KYIV. May 5 (Interfax-Ukraine) – The decline in real gross domestic product (GDP) of Ukraine in the first quarter of 2023 slowed down to 13.5% compared to the same period last year from 31.4% and 30.6%, respectively, in the fourth and third quarters of 2022, this estimate was published by the National Bank of Ukraine (NBU) in the inflation report on its website on Friday night.
According to it, from the second quarter of 2023, the economy will begin to recover and immediately by 15.9%, given the low base of the second quarter of last year, when the decline was 36.9%.
In the third and fourth quarters of this year, as the National Bank expects, growth will slow down to 3.9% and 3.7%, respectively, and in just this year, real GDP will grow by 2% after falling by 29.1% in the past.
The described trajectory is significantly better than the January estimate of the NBU, in which growth for the year was forecasted at only 0.3%. Then the National Bank expected a decline in the first quarter by 19.5%, growth in the second by 11.7%, in the third – by 1.5% and in the fourth – by 8.2%.
For the next year, the NBU, as reported, improved its growth forecast from 4.1% to 4.3%, and in 2025 it expects, as before, its acceleration to 6.4%.
“The baseline scenario is based on assumptions about Ukraine’s consistent compliance with the obligations of the new cooperation program with the IMF, the implementation of a coordinated monetary and fiscal policy, the gradual leveling of quasi-fiscal imbalances, in particular in the energy sector. The baseline scenario also assumes a tangible reduction in security risks from the beginning 2024, which will contribute to the full unblocking of seaports, the reduction of the sovereign risk premium and the return of forced migrants to Ukraine,” the report says.
The key risk for this forecast remains a longer duration and intensity of the war, which could slow down the economic recovery and worsen inflation and exchange rate expectations, the National Bank emphasizes.
“The war also generates other risks: the emergence of additional budgetary needs and significant quasi-fiscal deficits, in particular in the energy sector; the complication or termination of the “grain corridor,” as well as the aggravation of problems associated with restrictions on the import of Ukrainian food by certain European countries; further destruction by the aggressor of the energy infrastructure, which could lead to a resumption of significant electricity shortages, which will limit economic activity and exports and lead to increased demand for imported equipment and energy resources, and hence for foreign currency,” the report says.
