Alfa-Bank (Kyiv) has improved our real GDP growth forecast for 2020 from 3% to 3.2% and expects economic growth to reach 3.8% in 2021, according to the bank’s macroeconomic forecast under the base case (most probable) posted on its website last week. According to the document, the economy would expand with moderate rates of 2.3-2.5% during the first three quarters of 2020. At the same time, the bank sees prospects for economic growth accelerating in the fourth quarter of 2020 to more than 4% due to expected thrust in bank lending, which would provide additional impetus for domestic demand.
“Low baseline effect would be another major reason behind economic growth acceleration at the end of 2020, as the last quarter of the previous year was associated with local slump in industrial and agricultural output,” the bank said in the forecast.
According to the bank’s analysts, low inflation would be one of the key features of 2020. According to the bank’s forecast, average annual growth in Consumer Price Index (CPI) would turn just 3.4% this year, after 7.9% in 2019.
“Only by the end of 2020, inflation would return to the target range set by the National Bank of Ukraine (4-6%), as a result of monetary easing and some recovery in producer prices,” the bank’s analysts said.
The bank’s experts share the recently updated central bank’s expectation of its prime rate at 7% by end 2020 from current 11%. However, they do not exclude that prolonged inflation below target range in 2020 would request for an even more accommodative monetary policy.
