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EBRD expects Ukraine’s economy to grow modestly

17.05.23 16:26
Ukraine’s economy is expected to grow modestly as businesses adapt to war circumstances. This is stated in EBRD’s Regional Economic Prospects forecast.

“Output is expected to increase by 1.0 per cent in 2023 and 3.0 per cent in 2024, on the assumption that the war continues throughout this period at a similar intensity to that observed in early 2023,” reads the report.

It is noted that after an unprecedented fall in GDP in 2022, estimated at 29.1 per cent, economic output has stabilised at around 70 per cent of the pre-war level in real terms.

According to EBRD data, most businesses continue operating, though with reduced capacity in an environment characterised by a war of attrition concentrated in the east and south-east of the country.

In particular, producers have to cope with frequent electricity shortages, damages to capital stock and infrastructure, logistical challenges, skill shortages and occasional air raids.

“In this tough environment, macroeconomic stability has been preserved, supported by clearer timelines of external financing and the long-term IMF programme approved in March 2023,” the Bank’s analysts consider.

As noted, external financing seems to be sufficient to cover large external and fiscal financing gaps and eliminate the need of monetary financing of budget deficits in 2023.

Inflation dropped to 21.3 per cent year-on-year in March 2023 and is likely to decline further.

EBRD expects foreign reserves to remain at adequate levels, supporting the exchange rate peg.

As reported, Ukraine will get access to $115 billion in long-term support thanks to the International Monetary Fund and the G7 countries.

In 2023, Ukraine expects to get $42 billion in financial aid, including $4.6 billion from the International Monetary Fund, Ukrinform reports.