The real growth of Ukraine’s gross domestic product in 2023 may be up to 5%, but given the existing risks, the Ministry of Economy is still conservatively keeping the growth forecast at 2.8%, said Natalia Gorshkova, Director of the Department of Strategic Planning and Macroeconomic Forecasting of the Ministry of Economy.
“In those working calculations that we have, we as well as most experts who gave you forecasts, we see the possibility this year to reach a real growth of about 5%,” she said at the discussion “New macroeconomic forecast for Ukraine: what will be the exchange rate, GDP and inflation”, organized by the Center for Economic Strategy (CES).
At the same time, Gorshkova pointed out that the ministry is not going to change the current forecast of 2.8% yet, as the risks remain quite significant.
“We are part of the budget process, and we would not want to revise the base for budget formation every time, like on a seesaw,” added the representative of the Ministry of Economy.
She specified that earlier the ministry forecasted the growth of Ukraine’s economy this year at 3.2%, but in June it was adjusted to 2.8% due to the destruction of the Kakhovskaya hydroelectric power plant and pessimistic expectations about the future harvest.
“Perhaps we were hasty,” Gorshkova pointed out.
Speaking about longer-range forecasts, the Economy Ministry representative noted that, like most experts, the ministry hopes that the war will end in 2024, and this will stimulate an early recovery in the economy.
“Therefore, according to the current forecasts that we have, we expect 5% growth next year,” said the director of the Department of Strategic Planning and Macroeconomic Forecasting of the Ministry of Economy.
According to her, the main driver of growth is investment dynamics, while the nature of investments will change: military investments will be replaced by investments in infrastructure projects, in projects related to reconstruction, as well as supported by foreign investments, and the return of migrants from abroad.
As for inflation, which the Ministry of Economy expects this year at the level of 14.7%, Gorshkova noted that the forecast of the agency remains also conservative, as the assumption of the possibility of revision of the official hryvnia exchange rate at the end of the year remains.
As reported, the National Bank of Ukraine last week raised the forecast of real GDP growth in Ukraine in 2023 from 2% to 2.9%, but lowered it for 2024 from 4.3% to 3.5%. In addition, the NBU improved its inflation estimate for this year from 14.8% to 10.6%.
The European Central Bank (ECB) upgraded its inflation forecasts for the euro zone from 2023 to 2025, worsening its estimate of GDP growth in the next two years.
According to new forecasts released by the ECB at its meeting on Thursday, consumer price growth in the euro zone will be 5.4% this year, 3% next year and 2.2% in 2025. In March, inflation was expected to be 5.3%, 2.9% and 2.1%, respectively.
Core inflation, which excludes food and energy costs, is expected to be 5.1% this year before slowing to 3% in 2024 and 2.3% in 2025.
The forecast for euro area GDP growth for 2023 has been lowered to 0.9% from the previously assumed 1%, and for next year to 1.5% from 1.6%. The estimate of the economic growth rate in 2025 remained unchanged at 1.6%.
Forecast of dynamics of changes in ukrainian GDP in % for 2022-2025 in relation to previous period
Source: Open4Business.com.ua and experts.news
Real GDP percentage changes over previous period in 2014-2022
Source: Open4Business.com.ua and experts.news
Dragon Capital investment company, one of the leading players on the Ukrainian market, forecasts real gross domestic product (GDP) growth of 3 percent in 2023, while previously it had expected a decline of 0.5 percent.
“We have already improved our forecast: we expect GDP growth of 3% this year,” the company’s founder and head Tomas Fiala said in an interview on Radio NV.
He said power outages have already stopped since mid-February, and economic results in recent months have been better than expected.
“And we hope the economy will grow, perhaps even more than 3 percent,” Fiala added.
Dragon Capital told Interfax-Ukraine that rate and inflation forecasts will also be updated soon.
Fiala noted that Ukraine’s nominal GDP in dollars fell to $160 billion in 2022 from $200 billion in 2021.
“This is the best figure in the last 10 years, more was only in 2021: GDP was $157 billion in 2020 and $160 billion in 2022,” the head of Dragon Capital said.
As reported, Ukrainian Finance Minister Sergei Marchenko late last week said he raised Ukraine’s GDP growth forecast for 2023 to 3.2%, while previously the government had estimated it at 1%, and the National Bank recently improved it from 0.3% to 2%.
Finance Minister Serhiy Marchenko said he raised Ukraine’s GDP growth forecast for 2023 to 3.2%, while previously the government estimated it at 1% and the National Bank recently improved it from 0.3% to 2%.
“Today we are in a much better economic situation compared to the period a year ago … We refrain from monetary financing in 2023, and the GDP growth forecast was raised to 3.2%,” the head of the Ministry of Finance wrote in a column of the publication “Economic truth.”
He added that inflation is falling faster than initially forecasted, from 26.6% in December 2022 to 17.9% in April 2023, but did not specify an updated inflation forecast.
Marchenko thanked business for supporting the budget in a difficult time of war, noting that while GDP fell last year by 29.1% tax revenues to the general fund of the state budget (excluding a number of factors, such as growth due to inflation and forced temporary VAT non-refund) increased by 2% – to 627.7 billion UAH.
Head of the Ministry of Finance said that on its part the Ukrainian government supports the business through a number of programs, in particular, compensation loan rates “available loans 5-7-9%”, which since the beginning of martial law loans totaling more than 106 billion UAH were granted.
Besides, the government grant program for business has been started, which has been already financed more than by 2 billion UAH, and also more than 60 billion UAH have been given from the beginning of martial law by the government guarantee program on portfolio basis.
“I am sure that with the joint efforts of entrepreneurs and the state we will be able to continue to provide funding for successful resistance to the aggressor, which is the key to our victory,” Marchenko stressed.
