Ukraine's economy to shrink by 6% this year – National Bank

Ukraine's economy to shrink by 6% this year – National Bank

Ukraine's economy will contract by 6% by the end of 2020, but from next year it is expected to grow by 4%, according to the quarterly NBU Inflation Report for July 2020.

"The economy will shrink by 6% by the end of 2020, but in subsequent years its growth will be about 4%. In turn, inflation will accelerate to 4.7% by the end of this year and will approach the National Bank's medium-term target of 5% in the following years," the report says.

The National Bank notes that the worst period for the economy is over. Easing of quarantine restrictions helps revive business activity. Sufficiently soft monetary and fiscal policies will support economic growth in the coming years. However, the pace of recovery will be constrained by still depressed consumer and investment demand, in particular, due to the high level of uncertainty over the spread of coronavirus.

The recovery will depend on the industry. The sectors most affected by the quarantine, in particular the services, trade and transport sectors, will partially recover in the third quarter. The recovery of the export sector, in particular in metallurgy, will occur next year, together with the growth of global demand. Agriculture is likely to be among the economic activities that will be least affected by the quarantine restrictions; but lower harvest volumes are expected this year due to poor weather conditions. Also, the IT sector will receive new incentives for development, especially in terms of projects for organizing remote work.

As Ukrinform reported, in the draft resolution "On Approval of the Forecast of Economic and Social Development of Ukraine for 2021-2023" approved by the Cabinet of Ministers, the Ministry of Economic Development, Trade and Agriculture forecasts that economy will grow by 4.6% in 2021, 4.3% in 2022 and 4.7% in 2023. At the same time, inflation of 7.3% is expected at the end of 2021, 6.2% - at the end of 2022, and 6% - at the end of 2023.


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