The World Bank has raised its projection for Ukraine’s gross domestic product (GDP) growth in 2021 to 3.8%, while early January it estimated the prospects for recovery at 3%.
According to the World Bank’s Europe and Central Asia Economic Update, Spring 2021: Data, Digitalization, and Governance, the forecast for GDP growth in 2022 has been worsened to 3%, compared to 3.1% in January.
The World Bank said that only a partial recovery in GDP growth of 3.8% is expected in 2021, given high uncertainty regarding the rollout of the vaccine and the slow pace of structural reforms to address bottlenecks to investment and to safeguard macroeconomic sustainability. The GDP growth projection of 3.8% is also underpinned by positive base effects in agriculture and processing industry, the World Bank said.
In addition, the World Bank expects inflation this and next year at 5%, in 2023 – 5.8%.
The current account deficit in 2021 will be 1.3%, in the next two years – 2.8% and 3.3%, respectively, World Bank analysts predict.
The net inflow of foreign direct investment in 2021 should increase by 2.4%, the next year – by 2.6%, and in 2023 it is expected the growth to triple and amount to 6.2%.
At the same time, the World Bank predicts a reduction in public debt in relation to GDP from 63.2% in 2020 to 62.4% in 2021, as well as 59.7% and 57.8% in the next two years.
According to the bank’s expectations, after a 7.4% decline in 2020, Ukrainian exports will grow by 3.4% this year, and by 2% and 4.4% in 2022 and 2023, respectively. As for imports, after a decline of 11.5% last year, this indicator is projected to grow by 6.8% this year, 5% in 2022 and 4.8% in 2023.
As reported by the State Statistics Service, Ukraine’s real gross domestic product in 2020 fell by 4% after four years of growth.
The World Bank will provide Ukraine with about UAH 2.5 billion to purchase a vaccine against coronavirus (COVID-19) disease, Deputy Health Minister Svitlana Shatalova said at a press briefing in Kyiv on Thursday.
“Ukraine will receive funds for the purchase of vaccines against COVID-19. Such assistance is provided by the World Bank. About UAH 2.5 billion is planned to be allocated for the new Ukraine Emergency COVID-19 Response and Vaccination Project,” she said.
“Relevant negotiations are being held between the Board of Directors of the World Bank and the government of Ukraine since December 2020. As part of the preparation of the project, the implemented vaccination strategy will be taken into account,” Shatalova said.
The World Bank revised upward its forecast for Ukraine’s gross domestic product (GDP) growth in 2021 to 3%, while early October it estimated the prospects for recovery to be twice as modest – at 1.5%.
According to the January 2021 World Bank’s Global Economic Prospects, estimates of the fall of the Ukrainian economy this year at 5.5% and its growth by 3.1% in 2021 remained at the same level.
As reported, the Ministry for Development of Economy, Trade and Agriculture of Ukraine maintains an estimate of the fall in Ukraine’s GDP in 2020 by 4.8% at the end of the year and expects its growth by 4.6% in 2021.
The National Bank of Ukraine (NBU) had previously expected the economy to decline by 6% last year, but towards the end of the year it improved its estimates, to about 5%, predicting a recovery in 2021 by 4.2%. The updated macroeconomic forecast of the NBU will be announced on January 21.
By the end of 2020, Ukraine plans to attract a $170 million loan from the World Bank out of the $300 million provided, the Finance Ministry said on Monday.
“Today, on December 14, Ukraine and the International Bank for Reconstruction and Development signed an agreement on the second additional financing in response to the COVID-19 pandemic for the Social Safety Nets Modernization Project,” the Ministry of Finance said in a message on the website.
“The main goal is social assistance and social services for low-income families, as well as assistance to those affected by the adverse economic impact of the pandemic,” the press service said, quoting Minister Serhiy Marchenko.
As the Ministry of Finance recalled, this is the second additional financing of the specified project, the total amount of the loan for it should be $750 million.
The World Bank’s Board of Executive Directors on Saturday night decided to provide Ukraine with a $300 million loan for the Second additional financing aimed at overcoming the consequences of the coronavirus disease (COVID-19) pandemic for the project “Modernization of social support system for the population of Ukraine.”
“Social protection measures, for the implementation of which a new loan is provided, will help the government of Ukraine finance social assistance programs in order to save about one million Ukrainians from falling below the poverty line,” the bank’s release quoted the words of its regional director for Eastern Europe (Belarus, Moldova and Ukraine) Arup Banerji.
The World Bank’s support for Ukraine to protect low-income citizens who have been severely affected by the COVID-19 outbreak is a powerful anti-poverty response, he said.
The World Bank reminds that the decision on the first additional financing for the above project in the amount of $150 million was made on April 30 this year.
According to the bank’s forecasts, due to the consequences of the pandemic, the poverty level in Ukraine could grow by 4 percentage points, reaching about 23% by the end of 2020.
Its experts report that the crisis due to the COVID-19 pandemic requires the introduction of prompt emergency response measures in the country and the provision of emergency cash assistance to citizens. It also highlighted the need to strengthen social protection infrastructure and develop systems capable of delivering payments to people in times of crisis.
“The allocated funds will help Ukraine finance urgent measures in the field of social protection to overcome the consequences of the COVID-19 pandemic, which provide for emergency cash payments to those citizens and households who have lost their jobs or sources of income as a result of the pandemic,” the message says.
The second additional funding will support the introduction of an online social assistance system and the expansion of social benefits and pensions through direct money transfers to bank accounts. Payments to families with low income will be carried out under the current program of state social assistance to low-income families, the World Bank said.
The World Bank estimates that 60% of Ukrainian citizens who are on the brink of poverty due to the economic consequences of the COVID-19 outbreak are not yet recipients of social assistance under one of the existing social protection programs.
Ukraine’s economy will shrink by 3.5% in 2020 due to the coronavirus-related crisis, while the global economy will lose 5.2% overall, the World Bank announced this in the updated Global Economic Prospects on Tuesday. “The depth of the contraction will depend on the duration of the health crisis, progress on major pending reforms, and the ability to mobilize adequate financing to meet sizable repayment needs,” the World Bank said.
According to the bank, next year the growth of the Ukrainian economy will resume at a rate of 3%, which is lower than the expected recovery of the global economy at 4.2%.
The World Bank said that compared with the previous forecast in January of this year, it worsened expectations of the dynamics of Ukraine’s GDP this year by 7.2 percentage points (pp), and in the next – by 1.2 pp.
