The Ministry for Development of Economy, Trade and Agriculture of Ukraine estimates a cut in GDP in January–February 2021 at 2.8% y-o-y, according to the Economic Activity Review for February.
“The ease of lockdown, i.e. transition to flexible lockdown in February following the January restrictions contributed to a partial recovery of production across industrial companies. However, the volatile incidence rates and unpredictability of new restrictions to be imposed continue to curb the development of major economic activities,” according to the review.
According to the Ministry of Economy, economic activity in the industrial sector declined by 4.6% in general. Consequently, the same trend was recorded in other industries as well:
- mining — 3.9%;
- steel industry — 3.5%;
- processing industry — 6.7%;
- mechanical engineering — 7.0%;
- textile industry — 6.7%.
As for the steel industry, the Ministry believes that lower performance resulted from high competition and protectionism in Ukraine’s key export markets.
The pause in investments in certain segments of the construction industry that consume steel products has an adverse impact on the domestic market of ferrous metals.
Only energy and pharmaceutics demonstrated a growth (1.9% and 0.4% respectively).
According to the Ministry’s forecast, the negative GDP trend in Q1 2021 will continue due to the extension of the flexible lockdown until the end of April.
“The pace of economic recovery will depend on the duration and toughness of the lockdown restrictions. A resurgence will begin only in Q2, with regard to the past year’s low comparison base and the roll-out of vaccination campaigns both globally and domestically,” adds the Ministry.
As reported earlier, the Ministry of Economy expected a further decline in the gross domestic product in Q1 2021 as a result of lockdown imposed in January. Economic growth from April to June 2021 will exceed 7%.
Earlier, the Ministry of Economy improved its outlook for a drop in Ukraine’s GDP to 1% in Q4 2020. Ukraine’s GDP in Q3 2020 declined by 3.5%.
This year, the Ministry expects a 4.8% growth of the national economy, and the catch-up industrial growth may even climb above 5%.
The International Monetary Fund (IMF) expects a 3.4% slowdown in Ukraine’s GDP growth in 2022 after a projected growth of 4% in 2021, according to Interfax-Ukraine citing the World Economic Outlook (WEO).
According to the forecast, inflation at 2021-end will be 7.2% and 6% at the end of the next year.
The current account deficit of 2.5% of GDP is projected in 2021, followed by an increase to 3.6% of GDP in 2022.
According to the IMF forecast, unemployment in Ukraine will reach 8.6% this year and 8.4% the next year.
According to the WEO, in five years Ukraine’s GDP will grow by 4% per annum with an average annual inflation of 5% and the current account deficit of 3.8% of GDP.
GDP growth in emerging and developing European counties is forecast to rise to 4.4% in 2021 and to 3.9% in the next year.
As reported earlier, the State Statistics Service estimated a fall in Ukraine’s real GDP at 4% in 2020 compared to the previous year. Last year, Ukraine’s GDP shrank following a four-year growth.
GMK Center’s analysis showed that the prospects for Ukraine’s economic growth in 2021 are estimated at 3–5% on average. At the end of March, the World Bank improved its forecast for Ukraine’s GDP in 2021 to 3.8%.
The share of mining & metals companies in Ukraine’s economy was estimated at $15.2 billion or 10.6% of GDP in 2019.
The Government of Ukraine increased the authorized capital of the Export Credit Agency by ₴1.8 billion, according to a Resolution posted on the Government’s website.
The Government ruled to increase the ECA’s authorized capital through the issuance of 1,800,000 additional shares with nominal value of ₴1,000 per share, simultaneously retaining 100% of these shares in state ownership.
To this end, the Ministry of Finance of Ukraine should issue debt securities in the amount of ₴1.8 billion with maturity of 15 years and annual interest rate of up to 9.3%.
“This means that ECA will finally have a financial resource to insure, reinsure, and guarantee transactions of Ukrainian exporters abroad to protect them against the risk of non-payment and financial costs associated with the implementation of foreign economic agreements,” wrote on his Facebook page the Head of the Parliamentary Committee on Economic Development, Dmytro Natalukha.
As reported earlier, the Verkhovna Rada of Ukraine in February approved in principle the draft Law No. 3793 on ensuring the effective functioning of the Export Credit Agency (ECA).
The document proposes to increase the authorized capital of ECA to ₴2 billion.
The state budget for 2021 provided for ECA financing in the amount of up to ₴1.8 billion.
GMK Center earlier explained how the Export Credit Agency would work in Ukraine.