Oxford Economics has worsened its expectations for real GDP growth in Ukraine to 3.5% in 2021 from 4% in the August forecast, as well as the forecast for economic growth in 2022 – to 3.4% from 3.5%.
“We have downgraded our 2021 GDP growth forecast from 4% to 3.5% to reflect the fourth wave of COVID-19, which could slow the recovery in the fourth quarter. Ukraine registers about 20,000 new COVID cases per day – this is the highest rate since the start of the pandemic,” Oxford Economics said in the forecast for October.
Daily vaccination increased sharply in October, but only 16% of the population is fully vaccinated, analysts say.
At the same time, analysts expect nominal GDP to grow to $196.2 billion in 2021, compared to $155.5 billion in 2020, and to $219 billion in 2022.
At the same time, in their opinion, in 2022 the economy could grow by 3.4%, subject to progress with vaccinations.
As for future expectations, Oxford Economics predicts that the Ukrainian economy will grow by 2.8% in 2023, 4% in 2024 and 4.1% in 2025.
Average annual inflation in 2021 is expected at 9.7% with a further decline in 2022 to 8.1%, in 2023 – 5.4%, in 2024 and 2025 – 5%.
The rapid rise in gas prices in Europe and high electricity costs may complicate the task of the National Bank of bringing inflation back to the 5% (+/-1%) corridor, analysts say.
In their opinion, high inflation will force the central bank to raise its refinancing rate from current 8.5% per annum to 9% in December, despite the fact that it made it clear that it prefers not to tighten monetary policy in the current cycle. At the same time, the growth of global inflationary risks in 2022 may require a further increase in the refinancing rate, the forecast said.
According to Oxford Economics, Ukraine will increase exports of goods by 22.6% this year, although exports will decrease by 11.8% next year, and will resume growth by 5.3% in 2023, and by 4.4% in 2024 and 5.2% in 2025.
Imports of goods to Ukraine by the end of this year will grow by 18.4% with a further decline by 3.7% in 2022, but will return to growth in 2023 – by 3.4%, in 2024 – by 2.7%, and in 2025 – by 3.7%.
Oxford Economics estimates the current account deficit this year at 0.7% of GDP with a further deepening in subsequent years: up to 2.8% of GDP in 2022 and 2.5% of GDP in 2023.
The average annual hryvnia exchange rate in 2021 is expected at Hr 27.3/$, in 2022 – Hr 28.7/$, in 2023 – Hr 29.4/$.
Analysts consider that the IMF is likely to approve the payment of the tranche in November in the amount of $0.7 billion.
