Fall in real GDP will increase to 35.6% in the fourth quarter, NBU predicts

28 October 2022, 12:09 PM
Ukraine's economy continues to decline due to hostilities (Photo:REUTERS/Stringer)

Ukraine's economy continues to decline due to hostilities (Photo:REUTERS/Stringer)

Ukraine’s central bank expects the country’s real gross domestic product in the fourth quarter will have contracted by 35.6% in annual terms, according to the report on National Bank of Ukraine’s official website.

The drop in real GDP was 34.4% in annual terms in the third quarter, while it is expected to be 37.2% in the fourth quarter, the NBU said.

The NBU estimates that the economy will return to growth from the second quarter of the next year. Growth will be 13.9% in the second quarter, 9.2% in the third quarter and 11.3% in the fourth quarter.

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In general, the NBU expects real GDP to have declined by 31.5% over the next two years, following growth of 4% in 2023 and 5% in 2024. The NBU prediction in July was for real GDP to shrink at an annual rate of 33.4% this year.

Nominal GDP could shrink to UAH 4.75 trillion ($120 billion), from UAH 5.46 trillion ($136.5 billion). Thanks to high inflation (30% this year, 20.8% next year and 9.4% in 2024), nominal GDP in hryvnia terms will rise to UAH 6.175 trillion in 2022 and to UAH 7.35 trillion in 2023.

The NBU’s forecast assumes that the IMF will launch a new program to help Ukraine and that there will be a decline in security risks from the second half of the next year.

The prediction scenario also foresees the reopening of all Ukraine's sea ports from the middle of the next year, an increase of heat and gas costs by up to 50%, and the return of 400,000 refugees out of the 8 million who left in 2022.

The baseline optimistic scenario assumes that international support will remain the main source of financing state budget needs and will be about $28 billion in 2023 and $20 billion in 2024.

This year Ukraine expects to receive $31.1 billion in international aid ($24.1 billion has already been received).

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