Business news from Ukraine

The decline in Ukraine’s real gross domestic product (GDP) in the first quarter of 2023 compared to the same period last year will slow to 19% from 35% and 30.8% respectively in the fourth and third quarters of 2022, the National Bank of Ukraine has published this forecast in an inflation report on its website.
According to him, in the second quarter of 2023 the economy will begin to recover and immediately 11.7%, given the low base of the second quarter of last year, when the decline was 37.2%.
In the third and fourth quarters of this year, the National Bank expects growth to slow to 1.5% and 8.2%, respectively, and real GDP will grow by 0.3% this year after a 30.3% decline last year.
The NBU’s updated estimates of the GDP dynamics are worse than last October, when it expected the economy to decline by 17.5% in the first quarter of this year and to grow by 13.9% in the second quarter, and by 4% for the year as a whole.
For next year, the National Bank has worsened its growth forecast from 5.2% to 4.1%, and expects growth to accelerate to 6.4% in 2025.
“The baseline scenario is based on the assumptions of launching a new cooperation program with the IMF, conducting a coordinated monetary and fiscal policy, the gradual leveling of quasi-fiscal imbalances, in particular in the energy sector. Also, the baseline scenario assumes a tangible reduction of security risks from the beginning of 2024, which will contribute to the full unblocking of seaports, reduction of the sovereign risk premium and the return of forced migrants to Ukraine,” the report notes.
It also provides for the absence of new critical damage from shelling, as well as the successful work of the government to attract international aid for the energy sector and the intensive restoration or replacement of damaged infrastructure.
The NBU specifies that the baseline scenario assumes a reduction in net outflows from Ukraine this year to 0.8 million from 8 million last year and a gradual return of 1.5-1.4 million in 2024-2025.
The central bank adds that this forecast also assumes continued active international financial support for Ukraine of $38.6 billion in 2023, $20 billion in 2024 and $8 billion in 2025, up from $32.5 billion last year.
The strongest risk for this scenario, the National Bank calls the prolongation of the war and its escalation, estimating its probability from 25% to 50%.
With 15-25% probability the National Bank considers such risks as increased emigration and growing energy shortages due to damaged infrastructure and unbalanced state finances (freezing of utility rates, cuts in international aid, emission deficit financing).
The NBU also names among the moderate risks of the baseline scenario a delay in the program with the IMF and the termination of the “grain corridor”, but their probability is lower – less than 15%.
The report also mentions such factor as “Marshall Plan”, which can strongly influence and improve macro-forecast, but its probability is estimated by the central bank below 15%.