The IMF expects a fall in Ukraine’s GDP in the fourth quarter of 2022 by 40.5% y/y

The International Monetary Fund (IMF) predicts a 40.5% drop in Ukraine’s GDP in the fourth quarter of 2022 compared to the same period last year. This is reported by Interfax-Ukraine with the reference to the department’s report.

“The slowdown in harvesting due to bad weather conditions, continued restrictions in the field of logistics and working capital, as well as Russian shelling of energy infrastructure worsened the prospects of the Ukrainian economy for the fourth quarter of 2022 and the first quarter of 2023,” the IMF notes.

In general, according to the IMF, by the end of 2022, Ukraine’s economy will decrease by 33% y/y.

In the first quarter of 2023, the decline will slow to 34.5%. After that, the economic recovery will begin: in the second quarter – by 6%, in the third – by 11.9%, and in the fourth – by 21%. During the year, the GDP of Ukraine will grow by 1% or 68% of the pre-war level.

“The risks remain extremely high. The next few months look very difficult due to the relentless attacks on critical civilian infrastructure. Accordingly, while the main staff scenario assumes economic stabilization in 2023, the range of plausible scenarios is very wide. The scale of the uncertainty underscores the need for contingency planning so that authorities can continue to respond to shocks,” the Fund emphasizes.

The IMF developed two more scenarios: negative – with a drop in GDP by 12.5% ​​– to 57% of the pre-war level, and positive – with economic growth of 10%, or up to 75% of the pre-war level.

The negative scenario predicts inflation of 40% compared to 22.5% in the baseline, a decrease in international reserves to $18 billion ($21 billion), as well as an increase in state budget expenditures to 68.8% of GDP (56.5% of GDP) with an expansion of the deficit by 16.8 % of GDP (9.1% of GDP). Accordingly, this requires an additional $9.5 billion in budget financing to the basic $39.5 billion.

As GMK Center reported earlier, the Ministry of Economy predicts a slowdown of Ukraine’s GDP decline in 2022 to 33.2% y/y. In October, according to Minister of Economy, Yulia Svrydenko, the economy decreased by 39% y/y due to Russian attacks on critical infrastructure facilities. If the attacks continue and there will be power outages, the fall in the country’s GDP may accelerate.

The NBU is waiting falling of Ukraine’s GDP in 2022 by 32% compared to 2021. In 2023, the National Bank predicts economic growth of 4-5%. Inflation rates, according to the forecast of the National Bank, will reach about 30% in 2022, and 20.8% next year.

The world economy in 2022, according to IMF forecasts, will grow by 3.2% compared to 6% at the end of 2021. In 2023, the growth of the global economy is expected to slow down to 2.7% y/y. The projected growth rate of the world economy in 2023 is the lowest since 2001, excluding periods of the global financial crisis and the acute phase of the COVID-19 pandemic.