Fitch expects Ukraine’s GDP to grow by 2% in 2023

The international rating agency Fitch Ratings has confirmed the long-term issuer default rating (IDR) of Ukraine in foreign currency at the CC level (high level of credit risk). It is stated on the organization’s website.

As the agency notes, the confirmation of Ukraine’s long-term IDR in foreign currency at the CC level reflects Fitch’s opinion about the likely further restructuring of commercial debt in foreign currency, taking into account the scale of economic damage from the war with the Russian Federation and the associated significant financial damage.

The Agency believes that a likely condition for large financial assistance provided by international official creditors is burden-sharing with commercial creditors.

Fitch also predicts an increase in the ratio of Ukraine’s national debt to GDP by 37 percentage points in 2022 – up to 80.2% (excluding state guarantees in the amount of 7.5% of GDP) and up to 84.0% by the end of 2023. The share of public debt in foreign currency increased to 66%, which added to currency risks, although the share of long-term debt on preferential terms also increased, the agency said.

According to the rating agency’s estimates, in 2022 the Ukrainian economy decreased by approximately 31%, and net migration figures abroad increased to 8 million people (based on UN data, which may be overestimated). In the third quarter of 2022, as Fitch noted, there was some consistent recovery in economic activity, but power outages following Russian shelling created additional challenges for 2023.

In 2023, the international rating agency predicts the growth of Ukraine’s GDP by 2%. The ongoing war is preventing the return of large numbers of refugees and large-scale investment.

Fitch expects Ukraine’s inflation rate to decline to 21% in 2023 from 26.6% in 2022, as the loss of producing capacity, power shortages and only partial elimination of supply chain disruptions offset weak domestic demand.

The agency expects the war to continue into 2023 within its current broad parameters, as there are no politically credible concessions that could form the basis of a negotiated settlement in the near future.

As GMK Center reported earlier, the International Monetary Fund (IMF) hopes to improvement of the world economy condition in the second half of 2023 and in 2024. Hopes that the global economy will avoid recession this year have been boosted by positive economic data from Europe and the US in recent weeks.