Rehabilitation of Ukraine’s economy is going to believably boost in the last months of 2021, as said in the latest Regional Economic Prospects report published by the European Bank for Reconstruction and Development (EBRD).
According to the EBRD report, the country’s gross domestic product (GDP) will grow by 3.5% annually in 2021-2022.
In 2021 this growth will be favoured by the lavishing harvest of grains and normalisation of business activities, yet the low rates of reforms implementation and Covid -19 vaccination remain the main risks for this forecast”, the document says.
It is noted that a prolonged lockdown in early 2021 led to a drop in Ukraine’s GDP by 2.2% in the first quarter compared to the first quarter of last year, but already in the second quarter there was an increase of 5.7%. This recovery was fueled by the double-digit growth in household consumption and investment, as well as the mighty increase in prices for major export commodities, primarily grain and iron ore. The growth in exports ensured a positive current account balance, which resulted in the increase of foreign currencies inflow and strengthening of UAH.
Inflation rose during 2021 and reached 11% in September amid rising food and energy prices. With this regard, National Bank of Ukraine had to tighten monetary policy and this year increased the discount rate four times already, as a result it rose from 6% at the beginning of the year to 8.5% in September.
Considering the extremely positive performance in the first half-year, EBRD has improved its 2021 growth forecast for Eastern Europe and the Caucasus region, which includes Ukraine, by 1.3 percentage points from its June forecast up to 5.5%. At the same time, the Bank warns of a number of serious threats associated with inflation due to high commodity and energy prices, labour market shortages, supply chain disruptions and devaluation of local currencies in some economies of the region.
As of September 2021, inflation in the EBRD regions increased by 3 percentage points in average compared to the end of 2019. As a response, a number of central banks in these regions have raised key rates.
The World Bank predicts the GDP growth in Ukraine in 2021 at the level of 3.8%, in 2022 – by 3.5%, in 2023 – by 3.7%.
Ministry of Economy of Ukraine predicts the GDP growth in the country by 4.1% in 2021.
International Monetary Fund (IMF) in its April forecast improved its prediction for Ukraine’s GDP growth in 2021 up to 4% from 3% in the October 2020 forecast. In 2022 IMF anticipates Ukraine’s GDP growth at 3.4% – the forecast has been improved from 2.7% in the previous survey. In addition, IMF expects that average annual inflation in Ukraine, after falling down to 2.7% in 2020, will increase to 7.9% in 2021, and decrease to 6.8% in 2022.
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