The fall of the Ukrainian economy in 2022 will be about 33% according to the baseline scenario, in which the war will last for another month and a half at the most, Alexander Pecheritsyn, a leading analyst at Raiffeisen Bank (Kyiv), said.
“If the war lasts until the end of the year, then (GDP) could fall as much as 45%,” he said at a zoom conference on Tuesday.
Pecheritsyn specified that this is the bank’s third forecast since the beginning of the war. According to him, the initial decline in the economy was estimated at about 15% based on previous fast-moving conflicts in the world, for example, in Georgia. Then, in March, the bank estimated a decline as low as 24%, taking into account the gross regional product and the map of hostilities. In particular, as part of this analysis, a 34% decrease in this year’s crop is expected.
Serhiy Kolodiy, Chief Manager for Macroeconomic Analysis at Raiffeisen Bank, recalled that in 2014-2015, the fall in GDP was approximately 25% compared with pre-war Ukraine (in official statistics, data are compared only for controlled territories).
Pecheritsyn added that in terms of GDP, the bank estimates a 39% drop in private consumption due to the emigration of 15% of the population, lower incomes and negative consumer expectations.
According to him, domestic investment, which is the most vulnerable component, will fall by half this year under the baseline scenario.
“On the positive side, production relocation programs have little effect, but on the scale of the total output, of course, it is small,” the analyst said.
Speaking about inflation, Pecheritsyn noted that the bank still maintains its forecast for this year at 17% after 10% in the past. He explained that the volume of purchases by the National Bank of military bonds in the amount of UAH 60 billion is still within the limits of controllable, in addition, state control over prices and the freezing of utility tariffs affect.
In general, speaking about the work of analysts during the war, Pecheritsyn said that the bank began issuing weekly military reviews.
“War is a new challenge, we are no strangers to them, since there was a coronavirus two years ago. But the current (challenge) is much more difficult,” he stressed.
Pecheritsyn until February of this year served as chief economist at Credit Agricole Bank (Kyiv).
As reported, according to the World Bank, which before the war expected the Ukrainian economy to grow by 3.2% this year, it will fall by 45.1%. According to his report from early April, in 2023 the Ukrainian economy is expected to recover by only 2.1%, which is also worse than previous expectations of 3.5%.
The National Bank of Ukraine predicts a decline in the country’s GDP this year by at least a third, refusing to make more detailed estimates. The IMF expects a 35% decline.
