The forecast for the international reserves for 2017 was lowered to $20.8 billion / Photo from UNIAN
The National Bank of Ukraine has lowered its GDP growth forecast in Ukraine in 2017 to 1.9% from previously projected 2.8% as part of a move to review the country's macroeconomic forecasts after trade with occupied areas in Donetsk and Luhansk regions was blocked in keeping with a decision by the National Security and Defense Council.
The unscheduled review was meant to accelerate a meeting of the International Monetary Fund's Executive Board on a new $1 billion disbursement, which was originally slated for March 20, but was postponed due to the need to update the macroeconomic forecasts, the NBU said.
The regulator notes that while projecting the country's real GDP for 2017, it took into account the negative impact of the Donbas trade blockade estimated at 1.3 percentage points (pp). At the same time, the projection includes the positive effect of favorable conditions on foreign markets estimated at 0.4 pp.
The regulator also revised downwards the outlook for the balance of payments, expecting a current account deficit of $4.3 billion, or slightly more than 4% of GDP, against the previously projected deficit at $3.5 billion by the end of this year.
The forecast for the international reserves for 2017 was lowered to $20.8 billion from $21.3 billion, projected earlier.
In addition, the regulator revised forecasts for 2018, revealing more optimistic figures: real GDP growth is projected at 3.2% against 3%; the current account deficit of the balance of payments is predicted at $4.3 billion against $3.4 billion. However, the forecast for the international reserves was revised downwards to $25.9 billion against $27.1 billion, as was projected earlier.
Inflation projections and NBU benchmarks remained unchanged: 9.1% and 8% plus/minus 2 pp in 2017, and 6% and 6% plus/minus 2 pp in 2018, respectively.
The Central Bank informed the updated forecasts could be agreed with the IMF within two days, and the IMF Executive Board on the Ukrainian issue might be held at the end of March.
Read alsoUkraine's finance minister estimates losses from Donbas blockade at 1.3% of GDPAs UNIAN reported earlier, Ukrainian President Petro Poroshenko on March 16 enacted a decision by the National Security and Defense Council of Ukraine to suspend all freight traffic with the Russian-occupied areas in Donbas. The decision followed an existing blockade by Ukrainian activists and Members of Parliament that had prevented coal shipments from reaching Ukrainian-based power plants and steel enterprises since late January. The coal blockade became a pretext for Russian-backed separatists to seize businesses that are located in the occupied territory but registered as taxpayers in Ukraine. Later, Poroshenko listed conditions under which Ukraine would be able to unblock traffic with occupied Donbas, among them are the return of seized assets, a ceasefire and the withdrawal of heavy weapons.
Ukraine's key lender, the IMF, on March 19 postponed indefinitely a board meeting on the disbursement of $1 billion to Ukraine.
Ukraine and the IMF agreed on an updated Memorandum of Cooperation in early March. Ukraine has already borrowed three tranches totaling $7.62 billion under the $ 17.5 billion Extended Fund Facility (EFF) program approved in March 2015, and hoped to receive a fourth $1 billion tranche by the end of 2016, but the IMF's decision was put off until 2017.