- May 10, 2022
- Posted by: admin
- Categories: Facts, News
Ukraine’s GDP will fall by 30% in 2022, and the country’s economy will grow by 25% next year, the European Bank for Reconstruction and Development (EBRD) published such an updated forecast on Tuesday, while in March it estimated this year’s decline at 20%, and growth in the next year at 23%.
GDP is expected to decline by 30% in 2022, followed by a 25% increase in 2023, assuming a massive recovery effort takes place, the report says.
Such a forecast, if implemented, means that in 2023 Ukraine’s GDP will be 12.5% lower than at the beginning of 2022.
“How long the hostilities last, the shape of any post-war settlement, the extent of reconstruction and how many refugees return home will also influence the recovery’s speed,” the report says.
“The war is putting Ukraine’s economy under enormous stress, with the heavy devastation of infrastructure and production capacities. It is estimated that between 30% and 50% of businesses have stopped their operations completely, causing about half of all employees to lose their jobs and income. Approximately 10% of the pre-war population has fled Ukraine and an additional 15% are displaced within the country. All this is severely weakening companies’ finances, thus exposing the banking sector to a drastic deterioration of asset quality,” the bank said.
“Huge production and logistical disruptions have caused inflation to rise 13.7% year-on-year in March 2022, and it is likely that inflationary pressures will persist throughout the year. Plummeting tax revenues, combined with government spending way above the budget, have opened a fiscal gap of at least $ 5 billion a month. Yet, because the fiscal gap is accompanied by a substantial external gap as well, it is clear that war bonds purchased by domestic banks and monetary financing of fiscal deficit allowed under martial law could plug only a small portion of the gap,” it said.
“In March, the external gap was largely covered by IFI lending, but more sustainable financing predominantly based on grants is needed,” it said.
According to the EBRD document, its estimate of the fall in Russia’s GDP this year has been maintained at the level of 10%, and in 2023 the bank predicts zero dynamics.
The GDP of Belarus, according to the EBRD forecast, will decrease by 4% in 2022 (in March, the bank predicted a decline in the Belarusian economy this year by 3%). Zero dynamics of the economy is expected in 2023 (the forecast has not changed since March).
As reported, with reference to the estimates of the World Bank, which before the war expected the growth of the Ukrainian economy this year by 3.2%, it will fall by 45.1%. According to its report from the beginning of April, in 2023 the Ukrainian economy is expected to recover by only 2.1%, which is also worse than previous expectations of 3.5%.
The National Bank of Ukraine predicts a decrease in the country’s GDP in 2022 by at least a third, refusing to make more detailed estimates. The IMF expects a 35% decline this year, also not giving forecasts for the future.
