The National Bank improved the estimate of GDP decline in 2022 – up to 32%

The NBU kept the discount rate at 25% per annum

The National Bank of Ukraine (NBU) improved its estimate of GDP decline in 2022 from 37.5% to 32% in the previous forecast. This is reported on the website of the regulator. The NBU’s Board also decided to leave the discount rate at the level of 25% per annum.

Economic activity slowly recovered in the second and third quarters of 2022 thanks to the further liberation of Ukrainian lands, business adaptation to new conditions and the grain corridor. The corridor resulted in a positive contribution to GDP compared to the July forecast.

“However, existing logistical problems, especially in steel industry, the destruction of capacities, in particular in energy, and a decrease in real revenues of the population are holding back the recovery of the economy. Agriculture is also expected to have a significant negative contribution to the change in real GDP – both due to lower yield indicators this year and much smaller cultivated areas. Because of this, the National Bank has only slightly improved its estimate of the fall in GDP in the current year – to about 32%,” the report says.

The forecasted easing of security risks from mid-2023 will be a key factor in future economic recovery. In particular, the full resumption of Black Sea ports will allow to significantly increase Ukrainian exports, and significant budgetary support will stimulate consumer demand and investments in the reconstruction of the country.

At the same time, the revitalization of the domestic economy will be hindered by the large scale of losses of labor force and production capacity, high world energy prices and significant import needs at the stage of post-war recovery. Therefore, under such conditions, the NBU estimates GDP growth rates in the following years as restrained – at the level of 4–5%.

Inflation in 2022 will reach about 30%. In 2023, it will slow down to 20.8%, and in 2024 it will be lower than 10%, provided that security risks are expected to decrease, and monetary and fiscal policies are coordinated.

The main risk for economic development remains a longer period of full-scale military aggression by the Russian Federation.

As GMK Center reported earlier, the Ministry of Economy estimated the drop in GDP of Ukraine in January-September at the level of 30% y/y. Among the positive economic factors, there was an improvement in the dynamics of transportation, both as a result of the increase in the export of agricultural products by sea transport, and due to the increase in the transportation of goods by railway.